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

Sabri Boubaker, Alexis Cellier and Wael Rouatbi ()

Journal of Banking & Finance, 2014, vol. 43, issue C, 226-246

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.

Keywords: Going private; Wealth gains; Corporate governance; Private benefits of control (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (17)

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Working Paper: The sources of shareholder wealth gains from going private transactions: The role of controlling shareholders (2014)
Working Paper: The sources of shareholder wealth gains from going private transactions: The role of controlling shareholders (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:43:y:2014:i:c:p:226-246

DOI: 10.1016/j.jbankfin.2014.03.025

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