Control Premium in the Russian Stock Market

Abstract

The stock market is a powerful mechanism redistributing corporate control. In recent decades, mergers and acquisitions were followed by purchasing the stock in the target company by the buying company in the stock market, which makes it relevant to study the market price changes following such operations. The objective of the article is to evaluate the target company control premium in the Russian stock market and to assess its dependence on the volume of the acquired stock and the sector affiliation of the target company. The method used to evaluate the control premium is based on the information about mergers and acquisitions, where the premium is assessed as cumulative average abnormal return observed after the market obtained information on the transaction. By the available statistic data, the control premium for the market as a whole was evaluated, the dependence of the premium on the stock size was analyzed and the premium volume was calculated and analyzed for different sectors of economy. Conclusions were drawn about the impact of insider information on the Russian market and the low efficiency of transactions from both an investment and speculative standpoints.