Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264582 
Year of Publication: 
2022
Series/Report no.: 
SAFE Working Paper No. 357
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
In this paper, we investigate a primary potential impact of leveraged buyout (LBOs) transactions: the effects of LBOs on the peers of the LBO target in the same industry. Using a data sample based on US LBO transactions between 1985 and 2016, we investigate the impact of the peer firms in the aftermath of the transaction, relative to non-peer firms. To account for potential endogeneity concerns, we employ a network-based instrumental variable approach. Based on this analysis, we find support for the proposition that LBOs do indeed matter for peer firms' performance and corporate strategy relative to non-peer firms. Our study supports a learning factor hypothesis: peers gain by learning from the LBO target to improve their operational performance. Conversely, we find no evidence to support the conjecture that peers lose due to the increased competitiveness of the LBO target firm.
Subjects: 
LBO spillovers
peer effects
IV approach
JEL: 
D45
L43
O33
Document Type: 
Working Paper

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