Abstract (300 words maximum)
Access to capital markets is one of the key benefits of becoming a publicly traded company. However, previous research has shown that companies in more recent years have returned to the private sector rather than staying public after the initial public offering. While existing research found numerous reasons for going private, there is a limited number of studies that identify factors that influence the shareholder returns of the decision to go private. This study attempts to uncover external and internal factors that affect shareholder returns. Our study includes U.S. restaurant companies listed under Standard Industry Codes 5810 and 5812 between 1997 and 2021. Thus, our final sample consists of 70+ firms. Data on going private transactions will be obtained from media outlets and SEC annual filings (10-Ks). Data for the dependent variable (shareholder stock returns) is available in The Center for Research in Security Prices (CRSP). Independent variables in our study are firm size, level of undervaluation, governance issues, executive team structure, board composition, managerial ownership, director independence, blockholders, and CEO duality. Regression analysis will be used to explain the variance in shareholder returns. This study expects that board composition and the executive management structure, will emerge as essential factors beyond traditional variables such as firm size as determinants of shareholder stock returns. The findings of this research study can provide important implications for firm executives considering going private and private equity investors trying to identify the best target firms that can be taken private.
Academic department under which the project should be listed
CCOB - Management, Entrepreneurship & Hospitality
Primary Investigator (PI) Name
Melih Madanoglu
Why Are Restaurant Firms Going Private?
Access to capital markets is one of the key benefits of becoming a publicly traded company. However, previous research has shown that companies in more recent years have returned to the private sector rather than staying public after the initial public offering. While existing research found numerous reasons for going private, there is a limited number of studies that identify factors that influence the shareholder returns of the decision to go private. This study attempts to uncover external and internal factors that affect shareholder returns. Our study includes U.S. restaurant companies listed under Standard Industry Codes 5810 and 5812 between 1997 and 2021. Thus, our final sample consists of 70+ firms. Data on going private transactions will be obtained from media outlets and SEC annual filings (10-Ks). Data for the dependent variable (shareholder stock returns) is available in The Center for Research in Security Prices (CRSP). Independent variables in our study are firm size, level of undervaluation, governance issues, executive team structure, board composition, managerial ownership, director independence, blockholders, and CEO duality. Regression analysis will be used to explain the variance in shareholder returns. This study expects that board composition and the executive management structure, will emerge as essential factors beyond traditional variables such as firm size as determinants of shareholder stock returns. The findings of this research study can provide important implications for firm executives considering going private and private equity investors trying to identify the best target firms that can be taken private.