estions exist in both the macroeconomic and the microeconomic context.
Three research questions will be investigated in the proposed study. These questions, together with the relevant hypotheses, are as follows:
1. Do leveraged buyouts create a conflict of interest between management and existing shareholders? Within the context of this research question, it is hypothesized that LBOs do create a conflict of interest between management and existing shareholders.
2. Do leveraged buyouts create a conflict of interest with respect to investment, financing, and dividend decisions? Within the context of this research question, it is hypothesized that LBOs do create a conflict of interest between investment, financing, and dividend questions.
3. Do leveraged buyouts affect the productivity of the firms involved? Within the context of this research question, it is hypothesized that LBOs adversely affect productivity in affected firms.
Statement of Purpose
The purpose of the proposed research will be to add significant content to the body of knowledge on LBOs. It is hoped that this additional knowledge will be useful to policy makers considering the application legal restraints on LBOs.
Definition of Terms
Acquisition is a "generic term covering all forms of acquiring another firm, such as consolidation, holding company, merger, or purchase of assets with cash or stock" (Nemmers, 1985, p. 7). A merger is the combination of two or more firms.
A leveraged buyout is one in which the cost of the purchase is largely borne by the firm being acquired. In most instances, these deals are structured to be financed by junk bonds. A junk bond is an (1) original issue, (2) high yield, (3) low grade, (4) corporate bond. In the context of high
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