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Course Topic: Agency Issues (Alternative Assignment) - Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts
Title of the article that you are to read: "Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts" by Jesse Edgerton. Published in the Journal of Finance, December 2012.
Assignment: Respond to the following issues (total write-up not to exceed 3 pages, double-space, 12 point font).
What is a private equity firm?
What is an LBO?
In general (i.e. not specific to the Journal of Finance article), what is the agency problem between stockholders and managers?
Describe the data used by the researcher in the analysis.
Summarize the main findings of the paper (you do not need to read the theoretical model section of the paper. In addition, you do not need to read the material contained in the paper's appendix.).
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Private equity means equity capital that is not quoted in the public exchange. Private equity firm is an investor manager that makes investment directly into private companies and conduct buyouts of the public companies resulting in delisting of the public equity. Private equity firms raise money from external financial institutional by getting capital commitments from them.
Private equity firms use such funds to buy controlling shares in mature ?rms through leveraged buyouts (LBOs), impose changes in ?rm operations or incentives, and eventually sell their shares to other ?rms or to public shareholders after some period, often several years or more.