Boot, A., Gopalan, R. and Thakor, A. (2008). Market liquidity, investor participation, and managerial autonomy: Why do firms go private? The Journal of Finance, 63(4):2013--2059.
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Affiliated author
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Publication year2008
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JournalThe Journal of Finance
We focus on public-market investor participation to analyze the firm's decision to stay public or go private. The liquidity of public ownership is both a blessing and a curse: It lowers the cost of capital, but also introduces volatility in a firm's shareholder base, exposing management to uncertainty regarding shareholder intervention in management decisions, thereby affecting the manager's perceived decision-making autonomy and curtailing managerial inputs. We extract predictions about how investor participation affects stock price level and volatility and the public firm's incentives to go private, providing a link between investor participation and firm participation in public markets.