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Going private transactions by U.S.-Listed Chinese companies: What drives the premiums paid?

Author

Listed:
  • Chen, Yea-Mow
  • Huang, Ying Sophie
  • Wang, David K.
  • Wu, Chun-Chou

Abstract

This paper examines the premiums paid by U.S.-listed Chinese companies in going-private transactions over the period from 2010 to 2012 and tests several incentive hypotheses for taking public companies private. Apart from the factors representing perceived difficulties and potential litigation risks in buying back shares, and corporate governance and agency issues, we focus our attention on the undervaluation of share prices and the amount of cash holdings of the sample firms. The latter two factors turn out to be the primary drivers of the premiums paid. Our empirical evidence strongly suggests that the current phase of going-private transactions by U.S.-listed Chinese firms is most likely to be linked to arbitrage considerations, i.e., to arbitrage the undervalued share prices and the cash holdings available to the acquirers.

Suggested Citation

  • Chen, Yea-Mow & Huang, Ying Sophie & Wang, David K. & Wu, Chun-Chou, 2014. "Going private transactions by U.S.-Listed Chinese companies: What drives the premiums paid?," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 79-91.
    • Handle: RePEc:eee:reveco:v:32:y:2014:i:c:p:79-91
    DOI: 10.1016/j.iref.2014.01.008
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    Cited by:

    1. Shachmurove, Yochanan & Vulanovic, Milos, 2017. "U.S. SPACs with a focus on China," Journal of Multinational Financial Management, Elsevier, vol. 39(C), pages 1-18.

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    More about this item

    Keywords

    Firm undervaluation; Corporate governance; Going private;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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