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FMPM Corporate Governance Aspects of LBOs 29 Jan.pdf225.66 kBAdobe PDFView/Open
Title: Shareholder wealth gains through better corporate governance - the case of European LBO transaction.
Authors: Andres, Christian
Betzer, Andre
Weir, Charlie
Keywords: LBOs
Corporate governance
Agency theory
Event study
Issue Date: Dec-2007
Publisher: Springer Verlag
Citation: ANDRES, C., BETZER, A. and WEIR, C. M., 2007. Shareholder wealth gains through better corporate governance - the case of European LBO transaction. Financial Markets and Portfolio Management, 21 (4), pp. 403-424
Abstract: We examine shareholder wealth effects in a heterogeneous sample of 115 European leveraged going private transactions from 1997 to 2005. Average abnormal returns as reaction to the LBO announcement amount to 24.20%. In cross-sectional regressions, we find that these value gains can largely be attributed to differences in corporate governance: on a macro level, abnormal returns for pre-LBO shareholders are larger in countries with a poor protection of minority shareholders. On a firm level, companies with a high pre-LBO free float and comparatively weak monitoring by shareholders tend to show high abnormal returns. Furthermore, companies that are undervalued with respect to an industry peer-group exhibit higher announcement returns, indicating that agency conflicts and/or market inefficiencies can serve as an explanation.
ISSN: 1555-4961
Appears in Collections:Journal articles (Management)

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