ABSTRACT:A key factor in the decision to convert a publicly owned company to private status is the expectation that value will be created, providing the firm with rent. These rents have implications regarding the property rights of the firm’s capital-contributing constituencies. We identify and analyze the types of rent associated with the newly private firm. Compared to public firms, going private allows owners the potential to partition part of the residual risk to bond holders and employees, rendering them to be (...) co-residual risk bearers with owners. We propose that new promotion-based contracts with bond holders and employees, reflecting their particular investments, be negotiated as the firm migrates from public to private status. These contracts should acknowledge the firm’s intent to maximize shareholder value and its need to take the risks necessary to do so, but support that the firm’s survival not be undermined due to its possibly opportunistic owners. (shrink)

The migration of publicly-held companies to private status through use of private equity has been both lauded and lambasted. While agency theorists praise the public-to-private or PTP firm as being an efficient form of corporate governance, others suggest that going private allows owners and managers to extract, rather than add, value.We contribute by developing a categorization of the potential sources of value for the PTP firm. We analyze the effects of each source of value, and find that there are specific (...) negative effects for non-equity stakeholders associated with several sources. Our analysis indicates that the degree to which value is added versus extracted will vary across firms; yet, all will tend to engage in some value extraction. Policy implications are discussed. (shrink)

The newly private corporation challenges scholars to re-examine corporate social responsibility under a markedly different governance system. We theorize regarding the implications of public corporations going private through use of private equity. The new governance system includes few owners and an expert, involved board of directors; combined with a greatly reduced public presence, public-to-private firms are proposed to place greater emphasis on financial performance and lesser emphasis on social performance. Several variables are proposed to moderate the lesser emphasis on social (...) performance. (shrink)

The Sarbanes-Oxley Act of 2002 is considered by many to have made the most sweeping changes affecting corporate governance since the Securities and Exchange Acts of 1933 and 1934. About 4 years after its passing, however, many governance experts question whether the time and expense of compliance engender any real reforms. This article examines whether corporations have restructured their boards in response to the enactment of Sarbanes-Oxley and finds evidence that companies are implementing changes that should strengthen the monitoring ability (...) of their boards. (shrink)