The Voting Premium in the Banking Industry: A Cross-Country Analysis

Abstract:     
Is the governance of banks different from other corporations? Which regulation and public policies enhance the governance of banks? We address these questions investigating the existence and magnitude of private benefits of control in banks around the world. We construct a new database covering 157 control-transfer transactions across 40 countries. We are able to detect the existence of an average 3.3% (as percentage of equity) block transaction premium. Given this estimation of private benefits of control, we examine their legal and regulatory determinants. We find evidence that bank regulations and supervisory practices have impact on the expropriation of minority shareholders. In particular, the regulation on entry plays a role in curbing private benefits of control in the banking industry. These results are consistent with the views that expropriation of minority shareholders is important internationally, and that regulation can restrain this expropriation.

Number of Pages in PDF File: 38

Keywords: corporate governance, private benefits of control, transaction premium, law and finance, banks, regulation

JEL Classification: G21, G28, G32, G34

working papers series