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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

Authors

Charlie Weir

David Laing

Mike Wright



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.

Journal Article Type Article
Publication Date Jun 30, 2005
Journal Journal of business finance and accounting
Print ISSN 0306-686X
Electronic ISSN 1468-5957
Publisher New Publisher Required
Peer Reviewed Peer Reviewed
Volume 32
Issue 5-6
Pages 909-943
Institution 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
DOI https://doi.org/10.1111/j.0306-686X.2005.00617.x
Keywords Public to private transactions; Incentives; Monitoring; Market for corporate control

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