Public to Private Takeovers and the Market for Corporate Control

58 Pages Posted: 9 Feb 2004

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

Charlie Weir

Robert Gordon University - Aberdeen Business School

David Laing

Robert Gordon University - Centre for the Enhancement of Learning and Teaching (CELT)

Abstract

This paper investigates the extent to which firms going private have different characteristics from other acquired firms. We find the firms going private have higher board shareholdings and higher institutional shareholdings. In addition, they have poorer growth prospects and experience more takeover speculation. However, there is no evidence that they have different internal governance structures, have higher free cash flow or spend different amounts on capital projects. It was also found that the premiums received by shareholders in firms going private were lower than those received by shareholders of other acquired firms. We also find novel evidence of private activity designed to ensure that a bid to take a firm private is successful. Overall the results offer stronger support for the financial incentive hypothesis rather than for the financial realignment hypothesis.

Keywords: Takeovers, UK, corporate governance, duality, director shareholding, private information, going private transactions, LBOS, market for corporate control

JEL Classification: G30, G32, G31, G32, l21, l25

Suggested Citation

Wright, Mike and Weir, Charles and Laing, David, Public to Private Takeovers and the Market for Corporate Control. Available at SSRN: https://ssrn.com/abstract=484343 or http://dx.doi.org/10.2139/ssrn.484343

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

Charles Weir (Contact Author)

Robert Gordon University - Aberdeen Business School ( email )

Garthdee Road
RGU
Aberdeen AB10 7QE
United Kingdom
0044 1224 263800 (Phone)
0044 1224 263838 (Fax)

David Laing

Robert Gordon University - Centre for the Enhancement of Learning and Teaching (CELT) ( email )

Schoolhill
Aberdeen, Scotland AB10 1F
United Kingdom
0044 1224 262246 (Phone)
0044 1224 263344 (Fax)

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