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This chapter investigates whether and to what extent tax benefits affect the likelihood of firms undertaking leveraged buyout (LBO) transactions.

With an identified sample of LBO firms and similar non-LBO counterparts, this chapter utilizes staggered changes in state corporate income tax rates as exogenous shocks and adopts a Logistic regression to analyze how these tax changes affect firms' probability of engaging in LBOs.

Firms are more likely to engage in LBOs after increases in corporate income tax rates. Specifically, the increase in the likelihood of firms undertaking LBOs following tax increases is between 6.9% and 12.9%. We also find that this positive relation is more pronounced for firms with higher levels of return on assets (ROA) and marginal tax rates (MTR). Finally, we report that the mean value of tax benefits accounts for between 28.5% and 170% of the premium paid to pre-buyout shareholders.

This chapter provides strong evidence that tax benefits constitute an important source of value creation in LBOs and adds to the debate regarding the role of tax benefits in LBOs.

In elite professional firms, minorities are actively recruited but struggle to move upward. The authors argue that initiatives aimed at general skill development can have unintended consequences for firm diversity. Specifically, the authors contend that approaches that win partner support through motivational significance and interpretive clarity provide a more effective avenue to skill development for minorities, who have less access than White peers to informal developmental opportunities. The authors also argue that a longer “partnership track,” which imposes a time limit on skill development, will benefit minority professionals. Using data on 601 offices of large US law firms in 1996 and 2005, the authors investigate the effects of five developmental initiatives and partnership track length on the representation of African-Americans, Latinxs, and Asian-Americans among partners. Observed effects are consistent with expectations, but patterns vary across racial-ethnic groups.