Quantifying Private Benefits of Control from a Structural Model of Block Trades

Schroth, E. & Albuquerque, R. (2009). Quantifying Private Benefits of Control from a Structural Model of Block Trades (Report No. 202/2008). ECGI.

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Abstract

We study the determinants of private benefits of control in negotiated block transactions. We estimate the block pricing model in Burkart, Gromb, and Panunzi (2000) explicitly accounting for both block premia and block discounts in the data. The evidence suggests that the occurrence of a block premium or discount depends on the controlling blockholder’s ability to fight a potential tender offer for the target’s stock. We find evidence of large private benefits of control and of associated deadweight losses, but also of value creation by controlling shareholders. Finally, we provide evidence consistent with Jensen’s free cash flow hypothesis.

Item Type: Monograph (Working Paper)
Additional Information: © Rui Albuquerque and Enrique Schroth 2009. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
URI: http://openaccess.city.ac.uk/id/eprint/13992

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