Private Benefits in Corporate Control Transactions

Thomas Poulsen
2007 Social Science Research Network  
This paper presents an analytical framework from which it can be inferred whether sellers or buyers in corporate control transactions value private bene...ts highest. I am thus able to suggest an answer to the question: Are blocks of shares traded because the buyer is a more e¢ cient monitor with high security bene...ts, or because the buyer has high private bene...ts from the control rights that come with the shares? Using voting rights as the vehicle for private bene...ts, I ...nd that the
more » ... I ...nd that the selling shareholders in block transactions attach more value to private bene...ts than the buyers. In tender o¤er transactions, the answer is that private bene...ts are insigni...cant to both sides of the transaction. As an alternative measure of the transaction premium, I calculate the abnormal return premium. This represents the stock market's valuation of the transaction. I ...nd that the stock market puts a positive premium on the sample transactions. Although this is not con...rmed by the regression results, the market therefore expects higher future security bene...ts. The negative coe¢ cients of relative voting power lend support to this conclusion, but they are not signi...cant. I also ...nd that inside shareholders have a very small e¤ect on these results, but that they do attach more value to private bene...ts. JEL Classi...cation: G30, G32, G34
doi:10.2139/ssrn.1007415 fatcat:hryzh3flendjzjef4gohzkhwny