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Why Do Controlling Families of Public Firms Sell Their Remaining Ownership Stake?

Published online by Cambridge University Press:  06 April 2009

Sandy Klasa
Sandy Klasa
Affiliation:
sklasa@eller.arizona.edu, Department of Finance, Eller College of Management, University of Arizona, Tucson, AZ 85721.
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Abstract:

I investigate what leads controlling families of publicly traded firms to sell their remaining ownership stake. The sale of a controlling stake is best explained in the context of theories of the firm related to optimal risk bearing, the separation of ownership and management expertise, the CEO succession process, and the monitoring provided by outside blockholders. A timing explanation is only marginally supported. The sale of a controlling stake is not explained by insufficient financial resources to fully invest in growth opportunities. This study offers insights into the final stage of the process in which entrepreneurs sequentially sell their firm to outside parties and also identifies the nature of costs of concentrated ownership.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 42 , Issue 2 , June 2007 , pp. 339 - 367
Copyright
Copyright © School of Business Administration, University of Washington 2007

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