Cited by 250Corporate Finance and GovernancePrivate Equity and Venture CapitalFinancial Markets and Investment Strategies

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Why Do Firms Use Private Equity to Opt Out of Public Markets?

Bharath, Sreedhar T., Dittmar, Amy K.·2010·Review of Financial Studies

DOI 10.1093/rfs/hhq016

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Abstract

We investigate how firms weigh the costs and benefits of being public in the decision to opt out of the public market and go private. We draw on previous studies of going private and on the subsequent well-developed theoretical literature on why firms go public to develop our hypotheses. We employ a comprehensive sample of going-private transactions from 1980 to 2004 in the United States and examine how these firms differ over their public life (from IPO to going private) relative to a sample of firms that went and remained public. Our results provide strong support for the importance of information and liquidity considerations in being a public firm. These factors are evident at the IPO, on average thirteen years before the going-private decision. Access to capital and control considerations become increasingly important in the choice of going private over the public life of the firm.

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Authors: Bharath, S. T., & Dittmar, A. K.
Affiliations: University of Michigan (US)
Venue: Review of Financial Studies
Publisher: Oxford University Press (OUP)
Published: 2010-03-23
Volume: 23
Issue: 5
Pages: 1771-1818
ISSN: 0893-9454 (ISSN-L)
1465-7368
DOI: 10.1093/rfs/hhq016
OpenAlex: W2142756864
Cited by: 247
References: 70
Citations by year: 2026: 13 · 2025: 20 · 2024: 9 · 2023: 9 · 2022: 15 · 2021: 14 · 2020: 14 · 2019: 15 · 2018: 21 · 2017: 17 · 2016: 19 · 2015: 16 · 2014: 10 · 2013: 17 · 2012: 15
FWCI: 50.38
Type: journal article
Language: en
Open access: closed
Locations: Review of Financial Studies (publishedVersion)
RePEc: Research Papers in Economics (submittedVersion)
Topics: Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
Social Sciences › Economics, Econometrics and Finance › Finance › Private Equity and Venture Capital
Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
Keywords: going private, private equity, going-private transactions, initial public offerings, firm liquidity, information costs, access to capital, corporate control

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Why Do Firms Use Private Equity to Opt Out of Public Markets?

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