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In addition, should consider difference between hedge fund and private equity-financed buyouts (hedge funds less hands-on).
===Lehn and Poulsen 1989===
@article{lehn_free_1989,
title = {Free {Cash} {Flow} and {Stockholder} {Gains} in {Going} {Private} {Transactions}},
volume = {44},
issn = {0022-1082},
url = {http://www.jstor.org/stable/2328782},
doi = {10.2307/2328782},
abstract = {We investigate the source of stockholder gains in going private transactions. We find support for the hypothesis advanced by Jensen that a major source of these gains is the mitigation of agency problems associated with free cash flow. Using a sample of 263 going private transactions from 1980 through 1987, our results indicate a significant relationship between undistributed cash flow and a firm's decision to go private. In addition, we find that premiums paid to stockholders are significantly related to undistributed cash flow. These results are especially strong for firms that went private between 1984 and 1987 and also for firms whose managers owned relatively little equity before the going private transaction.},
number = {3},
urldate = {2016-06-20},
journal = {The Journal of Finance},
author = {Lehn, Kenneth and Poulsen, Annette},
year = {1989},
pages = {771--787},
file = {Lehn and Poulsen (1989) - Free Cash Flow and Stockholder Gains in Going Private.pdf}
}
Supports Jensen's free cash flow hypothesis.
Data:
*PTP sample from Wall Street Journal Index (1980 through 1989)- see Appendix in paper
*Firm characteristics from COMPUSTAT
Variables:
*CF = INC-TAX-INTEXP-PFDDIV-COMDIV
*CF/EQUITY
*Lagged SALESGR
*TAX/EQUITY
*FOOTSTEPS (=1 if competing bid or takeover speculation in WSJ)
===Jensen 1988===
@article{jensen_takeovers:_1988,
title = {Takeovers: {Their} {Causes} and {Consequences}},
volume = {2},
issn = {0895-3309},
shorttitle = {Takeovers},
url = {http://www.jstor.org/stable/1942738},
number = {1},
urldate = {2016-06-17},
journal = {The Journal of Economic Perspectives},
author = {Jensen, Michael C.},
year = {1988},
pages = {21--48},
file = {Jensen (1988) - Takeovers Causes and Consequences.pdf}
}
General overview of LBOs. Free cash flow theory. For our purposes, the following are relevant:
*Oil and gas, banking and finance, insurance are top 3 target industries (1981-84)
*Warning signs: large cash flows, acquisition activity, low growth prospects
=Innovation Factors/Phenomena Papers=
