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Management Buyouts in Times of Economic Policy Uncertainty

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Article number103499
<mark>Journal publication date</mark>31/03/2023
<mark>Journal</mark>Finance Research Letters
Number of pages8
Publication StatusPublished
Early online date25/11/22
<mark>Original language</mark>English


Using a sample of 18,225 global buyouts, we find that management buyouts (MBOs) are significantly more likely to occur if economic policy uncertainty (EPU) increases. This finding is consistent with the idea that EPU provides an opportunity for insiders to capitalize on private information and time the market. Further results suggest that market timing pays off on average. We find that MBOs achieve more favorable buyout prices and greater post-buyout operating improvements than institutional buyouts during times of high EPU. Our results hold when exploiting close national election races as a quasi-natural experiment for EPU.