The authors are respectively, Rehn Professor of Finance at Southern Illinois University, Carbondale, IL; and Assistant Professor of Finance at Murray State University, Murray, KY.
UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS
Article first published online: 7 DEC 2006
Journal of Business Finance & Accounting
Volume 21, Issue 4, pages 563–576, June 1994
How to Cite
Davidson, W. N. and Cheng, L. T.W. (1994), UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS. Journal of Business Finance & Accounting, 21: 563–576. doi: 10.1111/j.1468-5957.1994.tb00336.x
- Issue published online: 7 DEC 2006
- Article first published online: 7 DEC 2006
- (Paper received February 1992, accepted June 1992.)
Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.