Going Private Transaction: Announcement Effects on Stock Price and Characteristics of Acquired Firms in Malaysia
Pei Ling Lee
Multimedia University (MMU)
January 22, 2009
Going private transactions increase tremendously of late in Malaysian stock market. This motivates us to study the driving forces of public-to-private transaction and stock price reaction surrounding buyout announcements. From 80 buyout proposals for the period 2001 to 2007, positive and significant abnormal returns of 19.35% is documented across 61 days surrounding event date. The finding corroborated with prior evidences that going private transaction generates positive shareholder wealth gains. Logit model was employed to estimate characteristics of firms that engage in going private transaction. The results show that firms that have larger cash balance, higher growth, higher profitability and borrowing capacity, lower dividend yield, undervalued, poorer collection policy and lower free float are more likely to go private. Using 34 holdout samples in 2008, the estimated model accurately classified 68.18% going private and non-going private firms.
Number of Pages in PDF File: 38
Keywords: Going Private, Stock Market
JEL Classification: G34
Date posted: January 22, 2009
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