TY  - JOUR
AU  - Degeorge,Francois
AU  - Zeckhauser,Richard
TI  - Information Handling and Firm Performance: Evidence from Reverse LBOs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3798
PY  - 1991
Y2  - August 1991
UR  - http://www.nber.org/papers/w3798
L1  - http://www.nber.org/papers/w3798.pdf
N1  - Author contact info:
Francois Degeorge
University of Lugano
E-Mail: francois.degeorge@lu.unisi.ch

Richard J. Zeckhauser
John F. Kennedy School of Government
Harvard University
79 John F. Kennedy Street
Cambridge, MA  02138
Tel: 617/495-1174
Fax: 617/384-9340
E-Mail: richard_zeckhauser@harvard.edu
AB  - We investigate the transition from private to public ownership of companies that had previously been subject to leveraged buyouts. As they go to the public markets for equity, such firms face an information asymmetry problem. Behavioral effects are also likely to be at work. We show that the combination of informational and behavioral effects will cause firms to handle information in particular ways, leading to an equilibrium pattern in which disappointing performance after the initial public offering should be expected. We find empirical support for this theory by studying 62 reverse LBOs that went public between 1983 and 1987. There is strong evidence that the performance of the reverse LBOs before going public overestimates their likely performance after the initial public offering. The market appears to anticipate this pattern.
ER  -