Private Benefits of Control: An International Comparison

Private Benefits of Control: An International Comparison

We estimate private benefits of control in 39 countries using 393 controlling blocks sales. On average the value of control is 14 percent, but in some countries can be as low as -4 percent, in others as high a +65 percent. As predicted by theory, higher private benefits of control are associated wit...

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Bibliographic Details
Published in:The Journal of finance (New York) Vol. 59; no. 2; pp. 537 - 600
Main Authors: Dyck, Alexander, Zingales, Luigi
Format: Journal Article
Language:English
Published: 350 Main Street , Malden , MA 02148 , USA , and 9600 Garsington Road , Oxford OX4 2DQ , UK Blackwell Science Inc 01-04-2004
Blackwell Publishers
Blackwell Publishers Inc
Subjects:
Bargaining power
Business ownership
Business structures
Comparative analysis
Corporate finance
Corporate regulation
Economic benefits
Investors
Manycountries
Market prices
Rule of law
Shareholders
Studies
Subsidiary companies
Tax benefits
United States > US
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Summary:We estimate private benefits of control in 39 countries using 393 controlling blocks sales. On average the value of control is 14 percent, but in some countries can be as low as -4 percent, in others as high a +65 percent. As predicted by theory, higher private benefits of control are associated with less developed capital markets, more concentrated ownership, and more privately negotiated privatizations. We also analyze what institutions are most important in curbing private benefits. We find evidence for both legal and extra-legal mechanisms. In a multivariate analysis, however, media pressure and tax enforcement seem to be the dominating factors.
Bibliography:istex:84A0B727CAD08512B6672D01434D8A996AFCD280
ArticleID:JOFI642
ark:/67375/WNG-2KT9NCWS-N
Dyck is from the Harvard Business School and Zingales is from the University of Chicago. Chris Allen, Mehmet Beceren, and Omar Choudhry provided invaluable research assistance in preparing the data. We thank Andrew Karolyi, John Matsusaka, David Moss, Tatiana Nenova, Krishna Palepu, Mark Roe, Julio Rotemberg, Abbie Smith, Debora Spar, Per Stromberg, Rene Stulz, an anonymous referee, Richard Green (the editor), and seminar participants from Georgetown University, Harvard Business School, the NBER corporate finance program, University of Chicago, the University of Pennsylvania (Wharton), and the University of Southern California, and the University of Toronto for helpful comments. We also gratefully acknowledge financial support from the Division of Research, Harvard Business School, the Center for Research on Security Prices, and the George Stigler Center at the University of Chicago. Any errors are our own.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2004.00642.x