A study of privatising a listed company in Hong Kong

Pao Yue-kong Library Electronic Theses Database

A study of privatising a listed company in Hong Kong


Author: Chan, Yin-ling Julia
Title: A study of privatising a listed company in Hong Kong
Degree: M.B.A.
Year: 1994
Subject: Privatization -- China -- Hong Kong
Corporations -- China -- Hong Kong
Stock ownership -- Law and legislation -- China -- Hong Kong
Hong Kong Polytechnic -- Dissertations
Department: Dept. of Management
Pages: 80, 35, [2] leaves : ill. ; 30 cm
Language: English
OneSearch: https://www.lib.polyu.edu.hk/bib/b1152530
URI: http://theses.lib.polyu.edu.hk/handle/200/3692
Abstract: The decision to go public is a milestone in a company's history. This is an individual decision that should be made on the company's and its shareholders' own unique circumstances. Although there are advantages for a company to go public including but not limited to yielding benefits to the Founders, we do see listed companies giving up their status and go private. There must be some benefits which attract the companies to go private. Going private simply rearranges the ownership structure and therefore involves no synergistic effect. The primary advantages of going private are: (1) administrative cost savings, (2) increased managerial incentives, (3) increased managerial flexibility, and (4) increased use of financial leverage and reduction of taxes. Our hypothesis is that taking a listed company private generates benefits for its major shareholder who buys out the company. We shall test the hypothesis by looking for abnormal returns in the share prices of the holding companies which are/were listed on the Stock Exchange of Hong Kong Limited for the period of the announcement of the privatisation proposals of their listed subsidiaries. This study tests and confirms a significant increase in the share prices of the holding companies of the successfully privatised companies at the announcements of their privatisation proposals of their subsidiaries. The overall result is consistent with the hypothesis that taking a listed company private generates productive gains.

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