Why Do Firms Use Private Equity to Opt Out of Public Markets?
Top Cited Papers
- 23 March 2010
- journal article
- research article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 23 (5) , 1771-1818
- https://doi.org/10.1093/rfs/hhq016
Abstract
We investigate how firms weigh the costs and benefits of being public in the decision to opt out of the public market and go private. We draw on previous studies of going private and on the subsequent well-developed theoretical literature on why firms go public to develop our hypotheses. We employ a comprehensive sample of going-private transactions from 1980 to 2004 in the United States and examine how these firms differ over their public life (from IPO to going private) relative to a sample of firms that went and remained public. Our results provide strong support for the importance of information and liquidity considerations in being a public firm. These factors are evident at the IPO, on average thirteen years before the going-private decision. Access to capital and control considerations become increasingly important in the choice of going private over the public life of the firm.Keywords
This publication has 49 references indexed in Scilit:
- The Going Public Decision and the Product MarketSSRN Electronic Journal, 2008
- Moving from Private to Public Ownership: Selling Out to Public Firms vs. Initial Public OfferingsSSRN Electronic Journal, 2006
- Why Do Firms Go Public? Evidence from the Banking IndustrySSRN Electronic Journal, 2005
- Factoring Information Into ReturnsSSRN Electronic Journal, 2005
- The effects of management buyouts on operating performance and valuePublished by Elsevier ,2002
- Why Wait? A Century of Life Before IPOAmerican Economic Review, 2001
- Going public and the ownership structure of the firmJournal of Financial Economics, 1998
- Ownership and operating performance of companies that go publicJournal of Financial Economics, 1997
- Information Disclosure Costs and the Choice of Financing SourceJournal of Financial Intermediation, 1995
- Liquidity and Asset Prices: Financial Management ImplicationsFinancial Management, 1988