Block Trades and the Benefits of Control in Slovenia

Abstract

While large blockholders characterize the governance systems in most Central and Eastern European countries, Slovenian corporate governance is still somehow shaped by the insider-outsider conflict with none of the outside shareholders being strong enough to exercise active control. However, there has been evidence of change since the voting rights have been concentrating in the hands of domestic and foreign non-financial companies and financial holdings. Our study reports no convincing evidence on the positive influence of the new blockholders on the firms' value (shared benefits of control), except for the acquisitions of blocks by the non-financial firms of the same industry (potential bidders). Nevertheless, the relatively high premiums paid for share blocks (private benefits of control), the large public skepticism on the role of the blockholders and, most importantly, the low liquidity and the lack of transparency of corporate transactions call for an improvement in the minority investors' protection in Slovenia. It seems that, despite the starting insider-outsider conflict characterising the governance of Slovenian firms, the main challenge in the governance of these corporations is becoming the protection of minority investors against the expropriation by "those in control."

Keywords: corporate governance, block trades, ownership, control, benefits of control

JEL Classification: G32, G34