Control Premium in the Presence of Rules Imposing Mandatory Tender Offers: Can it Be Measured?
IAFC Universita Bocconi Working Paper
39 Pages Posted: 18 Mar 2005
Date Written: 2004
In this paper we modify the approach pioneered by Barclay and Holderness (1989) and recently reproposed by Dyck and Zingales (2004) in order to measure the value of control in countries, like Italy, where transfer of control is regulated by law. Our estimates range from 12% to 14%, depending on the number of shares acquirers expect to buy on the market in force of the obligation to launch a tender offer.
Our results confirm some theoretical predictions, namely a positive relation between the magnitude of the premiums and the degree of stock-pyramiding. In general terms, the magnitude of private benefit of control observed from our analysis is smaller then in previous studies.
Our results suggest further research, aimed at testing similar methodologies in other countries in which transactions that convey control are driven by legal requirements, and at assessing if a relation actually exists between the appeal and the credibility of the acquirers, on one hand, and the observed magnitude of control premia, on the other.
Keywords: control premium, private benefits, tender offers, transfer in corporate control, value of control
JEL Classification: G34
Suggested Citation: Suggested Citation