Reasons for the Popularity of LBOs during the 1980

Thus, These new form of financing combine with the need to create new ways to incentive management, has created the new EVA. This is a System based in a performance measure, in simple words; the EVA measures the profitability of the investment done by shareholders in a company, against any other equity opportunity in the market.
As Breadley & Meyer set in their book, "A perfect System of corporate governance would give managers all rights incentives to make value-maximizing investment and financing decision". Therefore the EVA, look for incentives a good manager performance in order to guarantee that the cash will be paid out to investor after a run out of positives NPV projects instead of wasteful investment, managers perquisites or private benefit.
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