Management buyout proposals and inside information.

摘要

A common contention is that management buyouts are motivated, at least partially, by inside information about the firms' value which would accrue to the shareholders even in the absence of a transfer of control. Existing evidence indicates that corporate managers do use inside information about their firm's value when trading its shares for their personal accounts and when making corporate financing decisions such as common stock repurchases. This evidence lends credibility to the inside information rationale for management buyouts because buyouts incorporate both the managers' corporate financing and personal investment decisions. While prior researchers demonstrate that inside information cannot be the sole motivation for buyout proposals, their results do not clearly show whether inside information contributes to managers' decisions to propose a buyout.; I study the stock price behavior of firms whose buyout proposals are withdrawn in order to determine whether managers' proposals reveal favorable information whose value would accrue to shareholders even in the absence of a transfer of control. On average, positive abnormal returns do persist after management buyout proposals are withdrawn, but this positive average is attributable to firms which receive subsequent acquisition bids. Firms with withdrawn buyout proposals that do not receive additional acquisition bids do not, on average, sustain positive stock price effects. This evidence is inconsistent with the contention that managers propose buyouts when they have favorable inside information about the firm's value.