THE FINANCIAL PERFORMANCE OF REVERSE LEVERAGED BUYOUTS

We examine the accounting and market performance of reverse leveraged buyouts (i.e., firms making their first public offering after previous ly completing a leveraged buyout). On average, the accounting performa nce of these firms is significantly better than their industries at th e time of the initial public offering(IPO) and for at least the follow ing four years, though there is some evidence of a decline in performa nce. Cross-sectional variation in accounting performance subsequent to the IPO is related to changes in the equity ownership of both operati ng management and other insiders, and is unrelated to changes in lever age. Finally, there is no evidence of abnormal common stock performanc e after the reverse leveraged buyout.