Shareholder wealth gains through better corporate governance: the case of European LBO transactions.

Abstract

We examine shareholder wealth effects in a heterogeneous sample of 115 European leveraged going private transactions from 1997 to 2005. Average abnormal returns as reaction to the LBO announcement amount to 24.20%. In cross-sectional regressions, we find that these value gains can largely be attributed to differences in corporate governance: on a macro level, abnormal returns for pre-LBO shareholders are larger in countries with a poor protection of minority shareholders. On a firm level, companies with a high pre-LBO free float and comparatively weak monitoring by shareholders tend to show high abnormal returns. Furthermore, companies that are undervalued with respect to an industry peer-group exhibit higher announcement returns, indicating that agency conflicts and/or market inefficiencies can serve as an explanation.

Citation

ANDRES, C., BETZER, A. and WEIR, C. 2007. Shareholder wealth gains through better corporate governance: the case of European LBO transactions. Financial markets and portfolio management [online], 21(4), pages 403-424. Available from: https://doi.org/10.1007/s11408-007-0061-7

• Journal Article Type: Article
• Acceptance Date: Dec 1, 2007
• Online Publication Date: Dec 1, 2007
• Publication Date: Dec 31, 2007
• Deposit Date: Dec 23, 2008
• Publicly Available Date: Dec 23, 2008
• Journal: Financial Markets and Portfolio Management
• Print ISSN: 1555-4961
• Electronic ISSN: 2373-8529
• Publisher: Springer
• Peer Reviewed: Peer Reviewed
• Volume: 21
• Issue: 4
• Pages: 403-424
• DOI: https://doi.org/10.1007/s11408-007-0061-7
• Keywords: LBOs; Corporate governance; Agency theory; Event study
• Public URL: http://hdl.handle.net/10059/278