Incentive Effects, Monitoring Mechanisms and the Market for Corporate Control: An Analysis of the Factors Affecting Public to Private Transactions in the UK

Weir, Charlie; Laing, David; Wright, Mike

doi:10.1111/j.0306-686x.2005.00617.x

Cited by 116 publications

(91 citation statements)

References 44 publications

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“…Karpoff (1999) and Gillan and Starks (2000) show that institutional investors actively influence corporate governance by presenting shareholder proposals at shareholder meetings. Other more recent studies show that institutions broadly influence managers' value-maximizing decisions such as R&D investments (Bushee, 1998), executive compensation (Almazan et al, 2005), privatization (Weir et al, 2005), and capital structure (Chung and Wang, 2014). Thus, these studies find empirical evidence that monitoring institutions (i.e., large shareholders with longterm investment strategies) have incentives to monitor firm management and that their monitoring is effective.…”

Section: Introductionmentioning

confidence: 84%

Institutional Monitoring: Evidence from the F‐Score

Chung¹,

Liu²,

Wang³

et al. 2015

Business Fin & Account

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The extant literature shows that institutional investors engage in corporate governance to enhance a firm's long-term value. Measuring firm performance using the F-Score, we examine the persistent monitoring role of institutional investors and identify the financial aspects of a firm that institutional monitoring improves. We find strong evidence that longterm institutions with large shareholdings consistently improve a firm's F-Score and that such activity occurs primarily through the enhancement of the firm's operating efficiency. Other institutions reduce a firm's F-Score. Moreover, we find evidence that, while monitoring institutions improve a firm's financial health, transient (followed by non-transient) institutions trade on this information.

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Section: Introductionmentioning

confidence: 84%

Institutional Monitoring: Evidence from the F‐Score

Chung¹,

Liu²,

Wang³

et al. 2015

Business Fin & Account

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“…Robbie and Wright (1995) argue that in smaller buyouts debt commitment and covenants are important triggers for corrective action. However, the agency argument does not appear to receive strong support for public to private buyouts (Halpern et al 1999;Opler and Titman 1993;Weir et al 2005;Renneboog et al 2007).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

Private equity and entrepreneurial management in management buy-outs

2011

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Critics claim that short-term profit orientation and high deal price strategies of private equity (PE) firms can negatively affect the ability of management buyouts to initiate and sustain entrepreneurial management. This study investigates this claim by comparing effects of majority PE backed and other buy-outs at different levels of financial leverage on post buy-out increases in entrepreneurial management. We propose that PE can be used as an organizational refocusing device that simultaneously increases entrepreneurial and administrative management. We find that majority PE-backed buy-outs significantly increase entrepreneurial management practices. Furthermore, the increased financial leverage positively affects administrative management in management buy-outs. However, the effect of high financial leverage is larger for majority PE-backed buy-outs. These results support the notion that PE firms help buyout companies develop ambidextrous organizational change: i.e. simultaneously develop entrepreneurial and administrative management practices. The findings have important implications for practitioners and policy makers.

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“…12 For example, the chief executive of Allied Textiles stated that the market was not reflecting the intrinsic value of the company and the chairman of the building firm Ward, claimed that the housing boom had not been reflected in the company's share price (Financial Times, 2000). Weir, et al (2005b) use data on perceived and actual undervaluation prior to going to private, controlling for other factors, to identify the importance of undervaluation in the PTP decision. They also find that undervalued firms had relatively high institutional shareholdings, suggesting that the buyout provides institutions with a means of exiting firms with poor market valuation, particularly during a time of limited pressure from the takeover market.…”

Section: The Wealth Transfer Hypothesismentioning

confidence: 99%

Leveraged Public to Private Transactions in the UK

2005

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This paper examines the magnitude and the sources of the expected shareholder gains in UK public to private transactions (PTPs) in the second wave from 1997-2003. Pre-transaction shareholders on average receive a premium of 40% and the share price reaction to the PTP announcement is about 30%. The main sources of the shareholder wealth gains are undervaluation of the pre-transaction target firm, increased interest tax shields and incentive realignment. An expected reduction of free cash flows does not determine the premiums nor are PTPs a defensive reaction against a takeover.

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Incentive Effects, Monitoring Mechanisms and the Market for Corporate Control: An Analysis of the Factors Affecting Public to Private Transactions in the UK

Cited by 116 publications

References 44 publications

Institutional Monitoring: Evidence from the F‐Score

Institutional Monitoring: Evidence from the F‐Score

Private equity and entrepreneurial management in management buy-outs

Leveraged Public to Private Transactions in the UK

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