Going private transactions by U.S.-Listed Chinese companies: What drives the premiums paid?

Yea-Mow Chen, Ying Sophie Huang, David K. Wang and Chun-Chou Wu

International Review of Economics & Finance, 2014, vol. 32, issue C, 79-91

Abstract: This paper examines the premiums paid by U.S.-listed Chinese companies in going-private transactions over the period from 2010 to 2012 and tests several incentive hypotheses for taking public companies private. Apart from the factors representing perceived difficulties and potential litigation risks in buying back shares, and corporate governance and agency issues, we focus our attention on the undervaluation of share prices and the amount of cash holdings of the sample firms. The latter two factors turn out to be the primary drivers of the premiums paid. Our empirical evidence strongly suggests that the current phase of going-private transactions by U.S.-listed Chinese firms is most likely to be linked to arbitrage considerations, i.e., to arbitrage the undervalued share prices and the cash holdings available to the acquirers.

Keywords: Firm undervaluation; Corporate governance; Going private (search for similar items in EconPapers)
JEL-codes: G32 G34 K22 M40 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:32:y:2014:i:c:p:79-91

DOI: 10.1016/j.iref.2014.01.008

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