Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest Volume XIX No. 2

Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest Vol XIX, Issue I

Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest 2015 Symposium Issu

Letter From The Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest Vol. XIX Issue

Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest Volume XIX No. 2

Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest 2015 Symposium Issu

Letter from the Editor

Letter from the Editor for the Richmond Journal of Law and the Public Interest Vol XIX, Issue I

Quantifying Private Benefits of Control from a Structural Model of Block Trades

We study the determinants of private benefits of control in negotiated block transactions. We estimate the block pricing model in Burkart, Gromb, and Panunzi (2000) explicitly accounting for both block premia and block discounts in the data. The evidence suggests that the occurrence of a block premium or discount depends on the controlling blockholder’s ability to fight a potential tender offer for the target’s stock. We find evidence of large private benefits of control and of associated deadweight losses, but also of value creation by controlling shareholders. Finally, we provide evidence consistent with Jensen’s free cash flow hypothesis

The Value of Control and the Costs of Illiquidity

We develop a search model of block trades that values the illiquidity of controlling stakes. The model considers several dimensions of illiquidity. First, following a liquidity shock, the controlling blockholder is forced to sell, possibly to a less efficient acquirer. Second, this sale may occur at a fire sale price. Third, absent a liquidity shock, a trade occurs only if a potential buyer arrives. Using a structural estimation approach and U.S. data on trades of controlling blocks of public corporations, we estimate the value of control, blockholders' marketability discount, and dispersed shareholders' illiquidity-spillover discount