Why Companies Go Private in Emerging Markets? Evidence from Poland
31 Pages Posted: 11 Feb 2005
Date Written: March 2005
Abstract
In recent years the number of going private transactions has sharply increased in emerging markets. The purpose of this study is to establish the financial characteristics of companies that have gone private using a dataset from Poland. We use a probit model to distinguish the difference between firms that went private and companies that did not. We find that the probability of going private grew with a rise in the concentration of foreign ownership, an increase in the relative level of free cash flows, a decrease in the level of long term debt, and a decrease in the liquidity of share trading. The results obtained are important both for investors wishing to identify entities characterized by a high likelihood of going private and for governmental authorities evaluating the methods and rationality of privatization mature state-owned enterprises.
Keywords: going private, free cash flow, information asymmetry, ownership structure, emerging markets
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
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