This paper examined the impact of large management buyouts (MBO's) on the federal tax revenues collected by the U.S. Treasury for the years 1982 to 1992. Prior research in this area has found large gains to the U.S. Treasury through increased tax collections as a result of the transactions surrounding MBO's. As this paper pointed out, however, those prior studies had some methodological shortcomings. This paper attempted to correct some of those prior deficiencies and, in doing so, found that most large MBO's produce a tax revenue loss to the Treasury.; Firms which engaged in an MBO between September 1, 1982 and December 31, 1989 with a purchase price of greater than {dollar}500 million were considered for this study. This dissertation analyzed four hypothesized tax revenue gains from MBO's: increased operating income through more efficient operations, capital gains from an initial buyout, capital gains from a subsequent initial public offering, and increased interest income from debt holders. This dissertation also considered four hypothesized tax revenue losses to the U.S. Treasury from MBO's: increased interest expense, decreased dividend income, losses to bondholders when the MBO firm enters bankruptcy and increased depreciation expense through a step-up in the basis of the assets after the MBO.; There were 32 firms which met the above criteria and which had financial information (income statement, balance sheet and statement of cash flow) for at least one year after the buyout.; The results of this work concluded that, in general, very few MBO's in total show a sizable revenue increase to the U.S. Treasury and most show some type of total loss.
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