Financial Visibility and the Decision to Go Private

55 Pages Posted: 18 Jan 2006 Last revised: 27 Dec 2008

See all articles by Hamid Mehran

Hamid Mehran

Independent

Stavros Peristiani

Federal Reserve Bank of New York--Retired

Multiple version iconThere are 3 versions of this paper

Date Written: December 26, 2008

Abstract

A large fraction of the companies that went private between 1990 and 2007 were fairly young public firms, often with the same management team making the crucial restructuring decisions both at the time of the initial public offering (IPO) and the buyout. This article investigates the determinants of the decision to go private over a firm's entire public life cycle. Our evidence reveals that firms with declining growth in analyst coverage, falling institutional ownership, and low stock turnover were more likely to go private and opted to do so sooner. We argue that a primary reason behind the decision of IPO firms to abandon their public listing was a failure to attract a critical mass of financial visibility and investor interest.

Keywords: LBOs, Going-Private Acquisitions, Financial Visibility, Free Cash Flow Hypothesis

JEL Classification: G32, G34

Suggested Citation

Mehran, Hamid and Peristiani, Stavros, Financial Visibility and the Decision to Go Private (December 26, 2008). Available at SSRN: https://ssrn.com/abstract=877006 or http://dx.doi.org/10.2139/ssrn.877006

Hamid Mehran

Independent ( email )

Stavros Peristiani (Contact Author)

Federal Reserve Bank of New York--Retired ( email )

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