Management Buyouts in Times of Economic Policy Uncertainty

Hammer, Benjamin and Mettner, Sven and Schweizer, Denis and Wünsche, Norbert (2023) Management Buyouts in Times of Economic Policy Uncertainty. Finance Research Letters, 52: 103499. ISSN 1544-6123

Abstract

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.