Agency conflicts in public and negotiated transfers of corporate control

Mike Burkart, Denis Gromb and Fausto Panunzi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2000-04
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Citations: View citations in EconPapers (56)

Published in Journal of Finance, April, 2000, 55(2), pp. 647-677. ISSN: 0022-1082

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Related works:
Journal Article: Agency Conflicts in Public and Negotiated Transfers of Corporate Control (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:69551

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