Purpose - The purpose of the study is to explore the board of directors in leveraged buyouts (LBOs) as a distinct source of value creation and to conceptually investigate the going-private transaction via LBO as a response to deficient governance structures as well as the post-buyout board restructuring. Design/methodology/approach - The paper provides a review of the literature on LBOs boards, and relies on agency theory and the resource dependence perspective to develop testable propositions. The work suggests that the board as a particular source of efficiency gains in LBOs warrants further empirical research. Research limitations/implications - The paper gives strong credence to the argument that boards represent a unique source of value creation in LBOs. Previous agency-theoretic work is complemented by focusing on the monitoring function of the board, but resource dependence theory introduced to suggest the importance of a strategic service and support function. The work is conceptual in nature and thus requires subsequent empirical testing to verify assertions set forth in this study. Practical implications - The paper shows that incentives of managerial equity participation and the discipline of debt are gradually losing their distinctiveness in today's buyout industry. To compete in an increasingly crowded environment, LBO specialists need to identify new sources of value to generate attractive returns for their investors. Originality/value - The paper extends the existing LBO literature by introducing resource dependent as a complementary framework. Given that the traditional LBO literature examines the discipline of debt and managerial ownership that explain their efficiencies, the role of LBO boards as a distinct value creation mechanism in buyouts is introduced.
- Boards of Directors
- Leveraged buy-outs