Employee Buyouts: Causes, Structure and Consequences

Posted: 23 Jul 1998

See all articles by Susan Chaplinsky

Susan Chaplinsky

University of Virginia - Darden School of Business

Greg Niehaus

University of South Carolina - Darla Moore School of Business

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics

Date Written: Undated

Abstract

This paper investigates the motivations for and consequences of including a broad group of employees in leveraged buyouts. We compare employee buyouts (EBOs) to buyouts where only top level management participates (MBOs). We find that the pre-buyout characteristics of EBOs and the structure of these transactions are consistent with predictions about the costs and benefits of employee participation both from a labor contract and corporate finance perspective. EBOs tend to occur in poorly performing firms with lower pre-buyout debt capacity and in circumstances where employees are more likely to be concerned about the appropriation of their firm-specific capital. Consistent with an effort to control the costs associated with employee ownership, EBOs tend to have lower employee risk-bearing costs and employees are given limited control rights in the early post-buyout years.

JEL Classification: G34

Suggested Citation

Chaplinsky, Susan J. and Niehaus, Greg and Van De Gucht, Linda M., Employee Buyouts: Causes, Structure and Consequences (Undated). Available at SSRN: https://ssrn.com/abstract=6986

Susan J. Chaplinsky

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4810 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/chaplinsky.htm

Greg Niehaus (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

College of Business Administration
Francis M. Hipp Building
Columbia, SC 29208
United States
803-777-7254 (Phone)
803-777-6876 (Fax)

Linda M. Van De Gucht

KU Leuven - Department of Applied Economics ( email )

Naamsestraat 69
B-3000 Leuven
BELGIUM

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