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

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

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.

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

• Journal Article Type: Article
• Acceptance Date: Sep 30, 2005
• Online Publication Date: Sep 30, 2005
• Publication Date: Sep 30, 2005
• Deposit Date: Dec 22, 2008
• Publicly Available Date: Dec 22, 2008
• 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
• DOI: https://doi.org/10.1080/09603100500278221
• Keywords: Private companies; Undervaluation; Leveraged buyouts; LBOs; Public to private transactions
• Public URL: http://hdl.handle.net/10059/277