Private Matters

36 Pages Posted: 27 Jan 2009

See all articles by Jean Helwege

Jean Helwege

UC Riverside

Frank Packer

Bank for International Settlements (BIS)

Date Written: December 1, 2008


Why do private firms stay private? Empirical evidence on this issue is sparse, as most private firms in the US do not report their financial results. We investigate why private status matters by taking advantage of a unique dataset of large, leveraged private firms with SEC filings. Unlike a number of other studies, we find that neither the existence of growth opportunities, nor the desire of firm founders to diversify, is a principal determinant of the decision whether or not to retain private status. Rather, the existence of private benefits of control appears to serve as the most significant incentive to stay private. Family-controlled firms have significantly lower probabilities of filing for an IPO, while a board structure that grants management relatively more autonomy lowers the probability of an IPO filing as well. Cross-sectional analysis of profitability and ex post performance suggests that while private benefits of control may encourage firms to stay private, they do not have detrimental effects on firm efficiency. In contrast, firms controlled by private equity specialists appear to place a low value on control benefits and are likely to go public as a means of cashing out.

Keywords: Private firms, IPO, initial public offering, private benefits of control, private firms, family firms, inside ownership, board composition, private equity, venture capital

JEL Classification: G24, G32, G34

Suggested Citation

Helwege, Jean and Packer, Frank, Private Matters (December 1, 2008). BIS Working Paper No. 266, Available at SSRN: or

Jean Helwege (Contact Author)

UC Riverside ( email )

900 University Ave.
Anderson Hall
Riverside, CA 92521
United States
9518274284 (Phone)

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
4161 280 8449 (Phone)

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