ABSTRACT
Leveraged buyouts (LBOs) are corporate restructuring transactions involving the transfer of whole companies or company divisions to new owners. This chapter reviews the agency and entrepreneurship perspectives of LBOs and outlines arguments concerning their impact on jobs and wages. The seminal work of Jensen provides an agency theory perspective through which LBOs have traditionally been understood. The entrepreneurial perspective is the impact of the LBO governance structure and the role that private equity (PE) firms play in their interaction with portfolio firms. While the theoretical perspectives provide an academic framework for understanding the impact of LBOs on jobs and wages, the nature of the PE business model has also received attention for how it impacts on jobs and wages. Davis et al. conduct one of the most comprehensive studies to date by analyzing the employment effects of PE-backed LBOs at both establishment and firm levels.
