Why Do Firms Use Private Equity to Opt Out of Public Markets?
Speaker
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 1980-2004 in the U.S. 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. Access to capital and control considerations become increasingly important over the public life of the firm. We also find that the information and liquidity factors that drive the firms to go private are evident at the initial public offering, on average thirteen years before the going private decision. |
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Marie Dutordoir |
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