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Do Going-Private Transactions Affect Plant Efficiency and Investment?

Sreedhar Bharath¹; Amy Dittmar^2,3; Jagadeesh Sivadasan^2,3

¹ Arizona State University · ² University of Michigan–Ann Arbor · ³ Ross School

We examine whether constraints on public firms affect firms' efficiency by testing if going private improves plant-level productivity relative to peer control groups. We find that, despite increases in productivity after going private, there is little evidence of efficiency gains relative to peer groups of plants constructed to control for industry, age, size, past productivity, and the endogeneity of the going-private decision. Going-private firms do extensively restructure their portfolio of plants, selling and closing plants more quickly than others. Our findings cast doubt on the view that public markets cause listed firms to operate plants less efficiently due to overinvestment but indicate that going private increases restructuring activity.

DOI

10.1093/rfs/hhu027

Volume

27 (7)

Pages

1929-1976

Language

en

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BibTeX

Sources

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