The Real Effects of Disclosure in Going Private Deals
54 Pages Posted: 27 Mar 2023
Date Written: March 1, 2023
Disclosure in going private transactions has become a topic of increasing interest for regulators and policymakers. Going private transactions are subject to special SEC rules that mandate management to provide detailed disclosure to all shareholders before a general vote. We examine the role of disclosure in addressing the frictions between sellers and buyers. We find that disclosure volume is positively associated with the likelihood of closing a deal. However, disclosure volume is also positively related to the intensity of shareholders’ negotiations, increasing the likelihood of upward price revisions, and shareholder litigation. Our findings speak to the extent to which the SEC rules fulfill the regulator’s intent when mandating going-private disclosures. Our findings suggest that disclosure has real effects related to the success of going private transactions, and shed light on the trade-offs that buyers face when determining the extent of disclosure in SEC filings.
Keywords: going private transactions, real effects, disclosure, litigation, SEC filings, acquisitions
JEL Classification: M41, M48, G34
Suggested Citation: Suggested Citation