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Agency conflicts in public and negotiated transfers of corporate control

Burkart, Mike, Gromb, Denis and Panunzi, Fausto (2000) Agency conflicts in public and negotiated transfers of corporate control. Journal of Finance, 55 (2). pp. 647-677. ISSN 0022-1082

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Identification Number: 10.1111/0022-1082.00222

Abstract

We analyze control transfers in firms with a dominant minority blockholder and otherwise dispersed owners, and show that the transaction mode is important. Negotiated block trades preserve a low level of ownership concentration, inducing more inefficient extraction of private benefits. In contrast, public acquisitions increase ownership concentration, resulting in fewer private benefits and higher firm value. Within our model, the incumbent and new controlling party prefer to trade the block because of the dispersed shareholders' free-riding behavior. We also explore the regulatory implications of this agency problem and its impact on the terms of block trades.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2000 the American Finance Association
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 22 Feb 2017 10:40
Last Modified: 20 May 2020 00:44
URI: http://eprints.lse.ac.uk/id/eprint/69551

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