Excess control, agency costs and the probability of going private in France

Mohamed Belkhir, Sabri Boubaker, Wael Rouatbi

    Research output: Contribution to journalArticlepeer-review

    11 Citations (Scopus)

    Abstract

    The current study investigates the determinants of going private (GP) in France. It contrasts a sample of 161 firms that went private between 1997 and 2009 with a propensity-score-matched sample of firms that remained public during the same period. The results indicate that, unlike for firms that remain public, the largest controlling shareholders (LCSs) of GP firms control their firms using an incommensurately small fraction of ultimate cash flow rights. This is consistent with the view that agency problems between large and minority shareholders make public firms less attractive to investors, which reduces the benefits of staying public and encourages the LCSs to take their firms private or accept takeover offers. Additional results show that GP firms have more undervalued stock prices and higher free cash flows than non-GP firms. Expected interest tax shields, low growth opportunities, and pre-GP takeover interest do not seem to affect the probability of GP.

    Original languageEnglish
    Pages (from-to)250-265
    Number of pages16
    JournalGlobal Finance Journal
    Volume24
    Issue number3
    DOIs
    Publication statusPublished - 2013

    Keywords

    • Corporate governance
    • Going private
    • Large shareholders
    • Ownership structure

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Fingerprint

    Dive into the research topics of 'Excess control, agency costs and the probability of going private in France'. Together they form a unique fingerprint.

    Cite this