Abstract
The source(s) of wealth created by managers taking a public company private in a Management Buyout (MBO) are not well understood. This study uses Data Envelopment Analysis (DEA) to empirically test two theories on these wealth gains, Jensen's Agency Cost of Free Cash Flow theory and the Asymmetric information theory. Prior research on these two theories has failed to produce conclusive results. The DEA analysis used here finds some support for the predictions of the Agency Cost of Free Cash Flow theory, but little for the Asymmetric Information theory.