The sources of shareholder wealth gains from going private transactions: The role of controlling shareholders

Abstract : The present study investigates the sources of shareholder wealth gains – as measured by cumulative abnormal returns and premiums – from going private transactions (GPTs). Using data for 314 GPTs from 18 Western European countries, we find that the announcements of GPTs generate a cumulative average abnormal return of about 22% and that pre-transaction shareholders on average receive a raw premium of about 36%. We further find that these shareholder wealth gains increase with the degree of separation of cash-flow and control rights of the pre-transaction ultimate owner and decrease with its ownership interests and with the presence of a second large shareholder. Taken together, these findings support the view that GPTs are expected to mitigate the inefficiencies induced by pre-transaction agency problems between controlling and minority shareholders. Thus, shareholder wealth gains from GPTs reflect the potential additional value that will be created under private ownership.
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Journal articles
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https://hal-upec-upem.archives-ouvertes.fr/hal-01155449
Contributor : Sabri Boubaker <>
Submitted on : Tuesday, May 26, 2015 - 4:44:44 PM
Last modification on : Wednesday, September 4, 2019 - 1:52:11 PM

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Sabri Boubaker, Alexis Cellier, Wael Rouatbi. The sources of shareholder wealth gains from going private transactions: The role of controlling shareholders. Journal of Banking and Finance, Elsevier, 2014, 43 (6), pp.226-246. ⟨http://www.sciencedirect.com/science/article/pii/S0378426614001083⟩. ⟨hal-01155449⟩

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