Abstract
In this paper, we analyze some of the ethical dimensions of going private transactions (GPTs), wherein publicly traded firms are taken private. Financial theory suggests that efficiencies may be realized in these transactions such that outside shareholders are made better off. Empirical evidence supports this theory. We therefore argue that GPTs are not inherently exploitive or unethical. The issues of the fiduciary duty of corporate managers to shareholders and their obligations to non-shareholders are also explored.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
De Angelo, Harry, Linda De Angelo and Edward M. Rice: 1984, ‘Going Private: Minority Freezeouts and Stockholder Wealth’, Journal of Law and Economics (October).
Easterbrook, Frank H.: 1985, ‘Insider Trading as an Agency Problem’, In John W. Pratt and Richard J. Zeckhauser (eds.), Principals and Agents, Boston: Harvard Business School Press.
Fama, Eugene F. and Michael C. Jensen: 1983a, ‘Separation of Ownership and Control’, Journal of Law and Economics (June).
Fama, Eugene F. and Michael C. Jensen: 1983b, ‘Agency Problems and Resident Claims’, Journal of Law and Economics (June).
Manne, Henry G.: 1966, Insider Trading and the Stock Market, New York: The Free Press.
Pinches, George E.: 1984, Essentials of Financial Management, New York: Harper & Row.
Smith, Adam: 1776, The Wealth of Nations. Page reference to the edition edited by Edwin Cannan, 5th ed., London: Methuen & Co., Ltd., 1930.
Stein, Benjamin J.: 1985, ‘Going Private is Unethical’, Fortune, November 11.
Williamson, Oliver E.: 1979, ‘Transaction-Cost Economics: The Governance of Contractual Obligations’, Journal of Law and Economics (October).
Author information
Authors and Affiliations
Additional information
Douglas A. Houston is Associate Professor of Business Economics at the University of Kansas. He has written several articles which have been published in journals such as Cato Journal and Kansas Law Review.
John S. Howe is Assistant Professor of Business at the University of Kansas. In 1985 he was awarded Outstanding Educator in the MBA Program. His articles have appeared in Journal of Banking and Finance and Journal of Financial and Quantitative Analysis.
Rights and permissions
About this article
Cite this article
Houston, D.A., Howe, J.S. The ethics of going private. J Bus Ethics 6, 519–525 (1987). https://doi.org/10.1007/BF00383743
Issue Date:
DOI: https://doi.org/10.1007/BF00383743