Quantifying private benefits of control from a structural model of block trades

Albuquerque, Rui; Schroth, Enrique

doi:10.1016/j.jfineco.2009.12.003

Cited by 96 publications

(49 citation statements)

References 30 publications

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“…In Dragotă et al (2013), being a domestic owner (DDO) or acquirer (DDA) had a positive influence on the control premium, like in Barclay and Holderness (1989), Ragozzino and Reuer (2011) or Albuquerque and Schroth (2010). In our case, the presence of the domestic investors increases the level of the discount for control.…”

Section: Yes (−)supporting

confidence: 43%

“…the stake owned by the buyer before the announcement day -proxy for the bargaining power of the buyer). We also tested another measure for firm size (total assets, AT) (like in Dyck and Zingales, 2004;Maury and Pajuste, 2005;and Albuquerque and Schroth, 2010), but it was strongly (directly) correlated with the total capitalization. We were also interested to analyse the potential impact of the return on equity (ROE) on the size of the discount for control.…”

Section: Dyck and Zingalesmentioning

confidence: 99%

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The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

Dragotă¹,

Ciobanu²

2017

Prague Economic Papers

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Most of the studies regarding control premium are focussed on the case in which it is positive. We considered the case when it is negative, investigating the determinants of the discount for control, having as study case the Romanian listed companies. Comparative to the general case of control premium, discounts for control are also determined by some other specific factors, like the number of non-trading days and the cash ratio. Some determinant factors of control premium have an opposite influence when this is negative: the percentage of shares purchased in the transaction, the ownership concentration, the fact the buyer or the seller is domestic, and the existence of a major shareholder owning more than 50% of shares. Consequently, some factors usually used in explaining the control premium cannot be suitably used for the case of the discount for control. Moreover, the negative impact of the undiversified portfolio is validated.

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Section: Yes (−)supporting

confidence: 43%

Section: Dyck and Zingalesmentioning

confidence: 99%

The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

Dragotă¹,

Ciobanu²

2017

Prague Economic Papers

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“…Whether this is affected by a toehold is questionable. Dyck and Zingales (2004) and Albuquerque and Schroth (2010) find that buyers with toeholds do not appear to be more effective in extracting benefits than buyers with no previous holdings.…”

Section: Framework Of Analysismentioning

confidence: 97%

“…This question is relevant if private benefits are costly and reduce firm value, which we know they do. Adams and Ferreira (2008) for example find that control enhancing mechanisms reduce the value of outside equity and Albuquerque and Schroth (2010) find that each dollar of private benefits costs shareholders two dollars of equity value.…”

Section: Introductionmentioning

confidence: 99%

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Private benefits in corporate control transactions

Poulsen

2011

International Review of Financial Analysis

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Does state ownership hurt or help minority shareholders? International evidence from control block acquisitions

Heugens

Sauerwald

Turturea

et al. 2019

Global Strategy Journal

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Research Summary We argue that state ownership is a crucial policy instrument for alleviating what is perhaps the most important principal–principal (PP) agency problem around the globe: private benefits of control (PBC). Our results illustrate that states reduce PBC in the companies in which they acquire controlling ownership positions. We also examine how legal and political institutions influence the extent to which states accomplish this goal. Antiself‐dealing legal regulations make states more effective in their efforts to constrain PBC, while political constraints make them less effective. Regimes with high state capacity appear not to prioritize PBC reduction. We test and corroborate these ideas in a sample of 1,354 control transactions across 54 countries. Managerial Summary The one‐sided appropriation of wealth by dominant owners is arguably the biggest threat to minority shareholders around the globe. An important question that has thus far remained unaddressed is whether state ownership of firms increases or decreases the extraction of these so‐called PBC. By investigating a large number of transactions involving the transfer of corporate control in 54 countries, we find that state acquirers of controlling ownership positions generally respect minority shareholder rights more than other types of new controlling shareholders. This effect is stronger in countries with strong legal protection of minority shareholders. However, political constraints make it more challenging for state acquirers to keep PBC in check while “strong” states may (mis)use the firms they invest in as policy vehicles.

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Quantifying private benefits of control from a structural model of block trades

Cited by 96 publications

References 30 publications

The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

Private benefits in corporate control transactions

Does state ownership hurt or help minority shareholders? International evidence from control block acquisitions

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