Leverage Buyouts: A Comparison of OTC With Exchange Listed Companies

Abstract

This paper studies alternative segments of the LBO market for the period 1980-1988.  The sample, segmented by trading location and by size and year of the buyout offer, consists of 442 announcements:  161 over-the-counter (OTC) firms and 281 exchange listed firms.  On average, the prediction errors for the entire sample for a -1, +1 window is 14.37 percent.  Additionally, we find significant prediction errors for both OTC and exchanged listed firms.  However, there are significant difference between the returns earned by shareholders of OTC vs. exchanged listed companies and these differences vary by year.