Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
54 Pages Posted: 2 Apr 2006
There are 3 versions of this paper
Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
Date Written: June 2007
Abstract
We analyze a publicly-traded firm's decision to stay public or go private, focusing on the stochastic nature of investor participation in the public market. The liquidity of public ownership is both a blessing and a curse: it facilitates trading and lowers the cost of capital, but it also introduces volatility in a firm's shareholder base. This exposes management to uncertainty regarding the identity of future shareholders and their intervention in management decisions, consequently affecting the manager's perceived decision-making autonomy and curtailing managerial inputs. We extract predictions about how investor participation affects stock price level and volatility and the public firm's incentives to go private, thereby providing a link between investor participation and firm participation in public markets.
Keywords: Managerial autonomy, liquidity, ownership, investor participation, firm participation
JEL Classification: G32
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
By Arnoud W. A. Boot, Anjan V. Thakor, ...
-
Market Liquidity, Investor Participation and Managerial Autonomy: Why Do Firms Go Private?
By Arnoud W. A. Boot, Radhakrishnan Gopalan, ...
-
Managerial Autonomy, Allocation of Control Rights and Optimal Capital Structure
By Arnoud W. A. Boot and Anjan V. Thakor
-
Managerial Autonomy, Allocation of Control Rights and Optimal Capital Structure
By Arnoud W. A. Boot and Anjan V. Thakor
-
The Impact of Managerial Discretion and Control Challenges on Dynamic Capital Structure
-
Corporate Finance and Governance in Firms with Limited Liability: Basic Characteristics
By Janis Berzins, Øyvind Bøhren, ...
-
The Fate of Firms: Explaining Mergers and Bankruptcies
By Clas Ch Bergström, Theodore Eisenberg, ...