This paper assesses different econometric approaches to working with count-based outcome variables and other outcomes with similar distributions, which are increasingly common in corporate finance applications. We demonstrate that the common practice of estimating linear regressions of the log of 1 plus the outcome produces estimates with no natural interpretation that can have the wrong sign in expectation. In contrast, a simple fixed-effects Poisson model produces consistent and reasonably efficient estimates under more general conditions than commonly assumed. We also show through replication of existing papers that economic conclusions can be highly sensitive to the regression model employed.

This study uses corporate tax return data to examine the evolution of firms' financial structure and performance after leveraged buyouts (LBOs) for a comprehensive sample of 317 LBOs taking place between 1995 and 2007. We find little evidence of operating improvements subsequent to an LBO, although consistent with prior studies, we do observe operating improvements in the set of LBO firms that have public financial statements. We also find that firms do not reduce leverage after LBOs, even if they generate excess cash flow. Our results suggest that effecting a sustained change in capital structure is a conscious objective of the LBO structure.