Going-Private Transactions of Financial Institutions
A Statistical Analysis
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The main goal of this article is to examine going- private transactions in the financial services industry. Our results provide evidence that the public announcement of these transactions produces positive cumulative abnormal returns (CARs) of about 15 percent. The public announcement of the withdrawal of these transactions generates negative CARs between 4 and 5 percent. We also find that the firm s age has a negative and significant relationship with the CARs for the time window ( 1, +1). Similarly, we find that the level of D&O ownership of management buyouts has a negative and significant ...
The main goal of this article is to examine going- private transactions in the financial services industry. Our results provide evidence that the public announcement of these transactions produces positive cumulative abnormal returns (CARs) of about 15 percent. The public announcement of the withdrawal of these transactions generates negative CARs between 4 and 5 percent. We also find that the firm s age has a negative and significant relationship with the CARs for the time window ( 1, +1). Similarly, we find that the level of D&O ownership of management buyouts has a negative and significant relationship with the CARs generated by the public announcement of the withdrawal of a going- private proposal. We also find that the total risk and the unsystematic risk of financial firms experience a positive and significant increase after the public announcement of a going-private proposal. Finally, our sample has negative decreasing average buy and hold abnormal returns during all considered periods: 20.3, 34.41, 43.3, 50.1, and 68.2 percent during the first 6, 12, 18, 24, and 36 months, respectively.
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