International Journal of Research in Finance and Management
2020, Vol. 3, Issue 2
Financial performance of LBO: An empirical study
This study investigates the financial performance of leveraged buyout companies during the period from 2005-06 to 2015-16. Four variables namely, (1) Earnings per Share (EPS), (2) Dividend per Share (DPS), (3) Return on Equity (ROE), and (4) Return on Investment (ROI) have been used to measure the financial performance of the sample companies by comparing the results between pre-LBO and post-LBO period with that of their matching control companies. Control sample methodology has been adopted to determine the industrial effect on the sample companies. Mean and coefficient of variation (CV) on the above variables have been computed to measure the financial performance of the sample companies between pre-LBO and post-LBO period. Paired sample t test has been conducted to determine whether the computed results are statistically significant or not. Analyzing the results it is found that there is improvement in financial performance of the sample companies since average EPS, DPS, ROE and ROI of the sample companies have been improved and CV on the above variables have been decreased after leveraged buyout. Moreover, Paired t tests on the above variables have depicted a statistically significant result.