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Undervaluation, private information, agency costs and the decision to go private.

Weir, C.; Laing, D.; Wright, M.

Authors

C. Weir

D. Laing

M. Wright



Abstract

There is widespread anecdotal evidence that poor stock market performance is an important reason for taking a company private. The results support the perceived undervaluation hypothesis. The finding also applies to management buy-outs, which indicates that the management of these firms had private information. It is also found that firms going private had non-optimal governance structures, higher board and institutional ownership. The last finding is consistent with going private transactions providing institutions with a means of existing firms with poor market valuation, particularly during a time of very limited pressure from the market for corporate control.

Journal Article Type Article
Publication Date Dec 30, 2005
Journal Applied financial economics
Print ISSN 0960-3107
Electronic ISSN 1466-4305
Publisher Taylor & Francis
Peer Reviewed Peer Reviewed
Volume 15
Issue 13
Pages 947-961
Institution Citation WEIR, C., LAING, D. and WRIGHT, M. 2005. Undervaluation, private information, agency costs and the decision to go private. Applied financial economics [online], 15(13), pages 947-961. Available from: https://doi.org/10.1080/09603100500278221
DOI https://doi.org/10.1080/09603100500278221
Keywords Private companies; Undervaluation; Leveraged buyouts; LBOs; Public to private transactions

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