Incentive effects, monitoring mechanisms and the market for corporate control: an analysis of the factors affecting public to private transactions in the UK.

Weir, Charlie; Laing, David; Wright, Mike

Abstract

This paper investigates the factors that influence the decision to change the status of a publicly quoted company to that of a private company. We find that firms that go private are more likely to have higher CEO ownership and higher institutional ownership. In relation to their board structures, firms going private tend to have more duality but there is no statistical difference in the proportion of non-executive directors. They do not show signs of having excess free cash flows but there is some evidence of lower growth opportunities. We do not find that firms going private experience a greater threat of hostile acquisition. The results are therefore consistent with incentive and monitoring explanations of going private. Calculation of the probability of going private shows that incentive effects are stronger than the monitoring effects.

Citation

WEIR, C., LAING, D. and WRIGHT, M. 2005. Incentive effects, monitoring mechanisms and the market for corporate control: an analysis of the factors affecting public to private transactions in the UK. Journal of business finance and accounting [online], 32(5-6), pages 909-943. Available from: https://doi.org/10.1111/j.0306-686X.2005.00617.x

• Journal Article Type: Article
• Acceptance Date: Jun 30, 2005
• Online Publication Date: Jun 30, 2005
• Publication Date: Jun 30, 2005
• Deposit Date: Dec 22, 2008
• Publicly Available Date: Dec 22, 2008
• Journal: Journal of business finance and accounting
• Print ISSN: 0306-686X
• Electronic ISSN: 1468-5957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 32
• Issue: 5-6
• Pages: 909-943
• DOI: https://doi.org/10.1111/j.0306-686X.2005.00617.x
• Keywords: Public to private transactions; Incentives; Monitoring; Market for corporate control
• Public URL: http://hdl.handle.net/10059/276