Going Private Transactions and Corporate Governance in the UK
43 Pages Posted: 11 Nov 2002
Date Written: October 28, 2002
We analyse the agency influences on an increasingly common phenomenon, the change of status from public to private. We find that companies going private are more likely to have higher CEO and institutional shareholdings. We also find firms going private are more likely to have the same person as CEO and chairman. There is no evidence that they have excess free cash flow but they do have lower growth opportunities. We do not find that firms going private experience a greater threat of hostile takeover than firms remaining public. Our results are consistent with incentive and monitoring explanations of the decision to go private but are inconsistent with the ineffective governance hypothesis.
Keywords: CEO shareholdings, agency theory, going private transactions, LBOs, takeovers, corporate governance, Cadbury Compliance, free cashflow, takeover threat, board of directors, duality, market for corporate control, UK
JEL Classification: C31, G50, D21, D44, D82, L16, L21, L20, M21
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