MANAGERIAL INCENTIVES AND THE STRUCTURE OF MANAGEMENT BUYOUTS

Management buyouts often occur when incumbent managers have large equi ty interests in the pre-buyout firms and are typically structured so t hat managers can increase their share of the outstanding common stock while reducing their dollar investment in the post-buyout firms. We pr ovide a rationale for such observations and develop a model to examine a manager's decisions on the structuring of a buyout, and how the str ucture of a buyout influences a manager's efforts in the post-buyout f irm. (C) 1998 Elsevier Science B.V. All rights reserved.