Incentive Realignment or Cost Saving: The Decision to Go Private
We examine whether the gains from incentive realignment have driven corporations out of the public security market. It is shown that going private transactions are due to the reduction in the diversification gains from the public market. The anticipated gains from incentive realignment are likely to be lowest among firms whose managers own most equity and the leverages are high. Avoiding the high cost of being public is the primary consideration for managers to take a firm private. Such firms go private because of financial distress and dwindling profitability. These kinds of going-private activities are counter-cyclical. On the other hand, a less distressed firm with diffused ownership has high anticipated incentive gains. The gain from incentive realignment is the dominant factor for these going-private transactions. Such firms go private because of an increase in profitability or an improvement in financial distress. We show that these going-private activities are pro-cyclical.
Going Private Incentive Realignment Cost Saving Diversification Gains Duration Competing Risks
Qing He Terence Tai-Leung Chong
Department of Economics, The Chinese University of Hong Kong
国际会议
广州
英文
1-47
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）