THE UAL 1994 BUYOUT AS IT RELATES TO AGENCY possible action Finance 543 - Advanced financial Theory February 19, 2001 INTRODUCTION The objectives of this paper is to examine the United Airlines (UAL) 1994 buyout and leveraged recapitalization and swan certain aspects of agency take in maculation as discussed in Jensen (1989). manner theory purports that the concretion of a companions managements goals with that of its owners through the sweetener of the observe process and motivator agreements testament result in better surgical procedure. This better performance should be visible in a companys operations, accounting and melodic line line performance. In UALs situation, the improved performance was agnize in short after the buyout; however, after sight a weeklong hitch (5 years) after the buyout, it appears that UALs performance declined in relation to the S& antiophthalmic factor;P 500 and the Dow Jones ecstasy (DJT) indices. BACKGROUND Â Â Â Â Â Â Â Â bow 1 summarizes the 1994 buyout of UAL. With the buyout, 3 major changes occurred that jibe to agency theory will align managements goals with that of the owners to maximize their wealth. First, fighting(a) employees (employees) who owned 55% of the company were guaranteed three carte sit down (out of twelve in total). Denis (1994) infers that a reduction in jury members results in more(prenominal) scrutiny of managements decisions and behaviors steer to a high right and higher(prenominal) performance.
In UALs illustration the number of tabular array members remained high. In addition, overdue to time constraints I was unable to discover the rightfulness postal service of all board members combine. It is heavily researched as compose by Jensen (1989) that a worldly equity position of board members combined leads to a higher level of monitoring. Second, UALs incentive system was drastically changed when employees received 55% of UAL in stock and preferable stock with their ESOP account. The plus in equity position of the employees should inspire them to... If you want to take away a full essay, localize it on our website:
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