Measuring the effect of restructuring on corporate performance: The case of management buyouts

Recent research has attempted to document that the financial gains associated with takeovers, LBOs and other types of restructuring are attributable to subsequent improvements in operating performance. In this paper we develop a more general framework for measuring the effect of corporate restructuring on performance and apply the framework to a sample of firms taken private by their management. We demonstrate that the estimation approaches employed in the literature embody restrictions on the general framework which the data can reject. However, our best estimates provide evidence that MBOs improve corporate performance, and the magnitudes of these improvements are similar to existing estimates.