Abstract
We propose a model to estimate the private benefits of control (PBC) in control transfer transactions for a broad range of regulatory environments, from private negotiations to mandatory tender offers. Barclay and Holderness (1989) and Dyck and Zingales (2004) Block Premium models are nested as special cases. With corporate control transfer regulation around the world moving from the Market Rule (MR) to the Equal Opportunity Rule (EOR) our theoretical model is a flexible tool for empirical studies. We apply our model to study the effect of the implementation of Chile’s Tender Offer Law in 2000 and find that control premiums fell significantly. This drop is statistically unrelated to the targets’ affiliation to an economic group. Our results suggest that improved corporate governance practices and the EOR alignment effect, reduced the scope for extraction of private benefits of control.
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