Business Commons^™

Mbo Financing Risks And Managers' Use Of Anti-Takeover Measures, Sarah Peck

Finance Faculty Research and Publications

In a management buyout (MBO) offer, managers have an incentive to offer stockholders a price low enough to compensate them for the risks of increasing their equity ownership in a highly leveraged buyout firm. As these risks increase, managers are more likely to combine their offer with an anti-takeover measure. These measures do not protect a low offer, but do result in a higher takeover price when managers are unwilling to match a competitive offer. Such measures, then, benefit shareholders.

The Carrot Versus The Stick: The Role Of Incentive Compensation And Debt Obligations In The Success Of Lbos, Sarah Peck

Finance Faculty Research and Publications

In a sample of 59 LBOs from 1984 to 1989, this study shows that, on average, the CEO is awarded more stock options as part of his/her post-leveraged buyout (LBO) compensation contract and that total cash compensation as a percentage of total assets is also higher after the LBO. However, the CEO is not more likely to change as a result of the LBO. Thus LBOs are used to restructure poorly designed incentives rather than to replace poorly performing CEOs. This study also finds that as the percentage of stock options awarded to the CEO increases, the likelihood of subsequent …

Alternative Methods Of Increasing The Precision Of Weighted Repeat Sales House Prices Indices*, Michelle H. Dreiman, Anthony Pennington-Cross

Finance Faculty Research and Publications

Weighted repeat sales house price indices have become one of the primary indicators used to identify housing market conditions and to estimate the amount of equity homeowners have gained through house price appreciation. The primary reason for the acceptance of this methodology is that it derives a location specific (typically, census division, state or metropolitan area) average change in house prices from repeated observations of individual house prices. It is this repeat attribute that allows repeat sales price indices to claim that it is a preferable index which does a better job of holding quality constant.

The amount of time …

Do Outside Blockholders Influence Corporate Governance Practices?, Sarah Peck

Finance Faculty Research and Publications

This study investigates whether block acquisitions lead to changes in board and CEO compensation characteristics and finds that block purchasers do not play a significant role in improving the firm’s governance practices. However, the majority of professional investors have sold their block within a year, suggesting that they do not own their stock long enough to alter governance policies nor to benefit from such changes. For the smaller number of firms where a new blockholder maintains their investment for more than a year, the use of equity based CEO compensation increases while the use of cash based compensation decreases.