Going-Private Transactions and Ex-Post Firm Behaviors: Evidence from Japanese Management Buyouts

This empirical examination assesses effects of ceasing the public trading of company stock, specifically the practice of "going-private," on subsequent corporate behavior. More specifically, this report identifies effects of going private transactions on corporate restructuring, investment, and innovation activities (patents, R&D) using Japanese going-private-type management buy-out (MBO) data. Firms that conducted public-to-private MBOs are matched with firms that have similar attributes to clarify empirically whether going private promotes corporate innovation activities or restructuring. The study described herein also tests factors underlying changes that occur after going private using a hypothesis related to motives for going private. According to the results, restructuring behaviors are observed after going private, but firm innovation activities are not confirmed among the MBO firms. Buyout funds enhance investment of MBO firms after the buyouts are completed, but they exhibit no effect on innovation activities.