Corporate Governance, Illiquidity, and Valuation Issues in Privately-Owned Corporations

Investors in private corporations face unique problems relating to corporate control, illiquidity and valuation of securities. In this research, we survey a large sample of US corporations. Our sample includes both private and public firms. Major findings of our research are as follows: Private firm...

Full description

Saved in:
Bibliographic Details
Published in:The journal of entrepreneurial finance 2003-12, Vol.8 (1), p.1-30
Main Authors: Bathala, Chenchuramaiah T., Bowlin, Oswald D., Dukes, William P.
Format: Article
Language:English
Subjects:
Agreements
Boards of directors
Business ownership
Closely held corporations
Corporate governance
Dividends
Equity
Executives
Inheritance taxes
Liquidity
Public companies
Shareholder voting
Shareholders rights
Small business
State court decisions
Stockholders
Studies
Valuation
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Investors in private corporations face unique problems relating to corporate control, illiquidity and valuation of securities. In this research, we survey a large sample of US corporations. Our sample includes both private and public firms. Major findings of our research are as follows: Private firms use written shareholder agreements for safeguarding ownership interests and dividend payments. Family owned firms dominate the ownership structure of private firms. Insiders of private firms own a much larger proportion of common stock than insiders in public firms, and the CEOs of private firms often happen to be the largest stockholders. The size of executive teams and boards are smaller in private firms than in public firms. However, the proportion of executives and board members who are also stockholders of the firm is larger in public firms. We find that a greater percentage of members on boards of private firms are outsiders, consistent with the arguments about the need for outside board members for objectivity and resolving conflicts among the closely-related stockholders. Our research also documents evidence relating to illiquidity of stock ownership and the different valuation approaches used in private firms. [PUBLICATION ABSTRACT]
ISSN:2373-1761
2373-1753
2373-1761
DOI:10.57229/2373-1761.1208