Management buyouts and firm-level productivity: Evidence from a panel of UK manufacturing firms

This paper presents an empirical investigation of the productivity effects of UK management buyouts (MBOs) over the period 1986-1997. It is the first study to use an augmented production function approach in order to determine and quantify: the Hicks-neutral productivity, the marginal productivity of labour, and the marginal productivity of capital effects of MBOs. The main findings are consistent with MBOs providing incentive and control systems that lead to improved firm-level productivity in the post-buyout organisation via reduced agency costs, debt bonding, and monitoring by buyout specialists.