Determinants of Private Bene…ts of Control Rui Albuquerque y

Abstract

We study the determinants of private bene…ts of control in negotiated block transactions. We estimate the block pricing model in Burkart, Gromb, and Panunzi (2000) explicitly dealing with the existence of both block premia and block discounts in the data. We …nd evidence that the occurrence of block premia and block discounts depends on the controlling block holder’s ability to …ght a potential tender o¤er for the target’s stock. Private bene…ts represent approximately 2 % to 4 % of the target …rm’s stock market value. Private bene…ts increase with the target’s cash holdings and decrease with its short term debt providing evidence in favor of Jensen’s free cash ‡ow hypothesis. Each $1 of private