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Financial Visibility and the Decision to Go Private

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  • Hamid Mehran
  • Stavros Peristiani

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 at both 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. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

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Bibliographic Info

Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 23 (2010)
Issue (Month): 2 (February)
Pages: 519-547

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Handle: RePEc:oup:rfinst:v:23:y:2010:i:2:p:519-547

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Citations

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Cited by:
  1. Constant Djama & Isabelle Martinez & Stéphanie Serve, 2012. "What do we know about delistings? A survey of the literature," Post-Print hal-00937899, HAL.
  2. Asker, John & Farre-Mensa, Joan & Ljungqvist, Alexander P., 2010. "Does the Stock Market Harm Investment Incentives?," CEPR Discussion Papers 7857, C.E.P.R. Discussion Papers.
  3. Billett, Matthew T. & Jiang, Zhan & Lie, Erik, 2010. "The effect of change-in-control covenants on takeovers: Evidence from leveraged buyouts," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 1-15, February.
  4. Yamin Ahmad & Russell Kashian, 2008. "Modeling the Time to an Initial Public Offering: When does the Fruit Ripen?," Working Papers 08-01, UW-Whitewater, Department of Economics.
  5. Kashefi Pour, Eilnaz & Lasfer, Meziane, 2013. "Why do companies delist voluntarily from the stock market?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4850-4860.
  6. Constant Djama & Isabelle Martinez & Stéphanie Serve, 2012. "What do we know about delistings? A survey of the literature," THEMA Working Papers 2012-38, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. De, Soumendra & Jindra, Jan, 2012. "Why newly listed firms become acquisition targets," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2616-2631.
  8. Anna Kovner & Chenyang Wei, 2012. "The private premium in public bonds," Staff Reports 553, Federal Reserve Bank of New York.
  9. Shourun Guo & Edie S. Hotchkiss & Weihong Song, 2008. "Do Buyouts (Still) Create Value?," NBER Working Papers 14187, National Bureau of Economic Research, Inc.
  10. Davies, Phil & Minton, Bernadette & Schrand, Catherine, 2008. "Commodity Price Exposure and Ownerhsip Clienteles," Working Paper Series 2008-7, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  11. Stavros Peristiani & Vanessa Savino, 2011. "Are credit default swaps associated with higher corporate defaults?," Staff Reports 494, Federal Reserve Bank of New York.
  12. Stuart, Toby E. & Yim, Soojin, 2010. "Board interlocks and the propensity to be targeted in private equity transactions," Journal of Financial Economics, Elsevier, vol. 97(1), pages 174-189, July.
  13. Bjorvatn, Kjetil & Farzanegan, Mohammad Reza & Schneider, Friedrich, 2012. "Resource Curse and Power Balance: Evidence from Oil-Rich Countries," World Development, Elsevier, vol. 40(7), pages 1308-1316.
  14. Badertscher, Brad A. & Katz, Sharon P. & Rego, Sonja O., 2013. "The separation of ownership and control and corporate tax avoidance," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 228-250.
  15. Jacob Oded & Allen Michel & Steven P. Feinstein, 2011. "Distortion in corporate valuation: implications of capital structure changes," Managerial Finance, Emerald Group Publishing, vol. 37(8), pages 681-696, August.
  16. Nicola Cetorelli & Stavros Peristiani, 2010. "Firm value and cross-listings: the impact of stock market prestige," Staff Reports 474, Federal Reserve Bank of New York.
  17. Gill, Andrej & Walz, Uwe, 2012. "Going public - going private: The case of VC-backed firms," CFS Working Paper Series 2012/02, Center for Financial Studies (CFS).

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