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

Mohamed Belkhir (), Sabri Boubaker and Wael Rouatbi ()

Global Finance Journal, 2013, vol. 24, issue 3, 250-265

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.

Keywords: Going private; Ownership structure; Large shareholders; Corporate governance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Excess Control, Agency Costs and the Probability of Going Private in France (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:24:y:2013:i:3:p:250-265

DOI: 10.1016/j.gfj.2013.10.002

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