We develop a search model of block trades that values the illiquidity of controlling stakes. The model considers several dimensions of illiquidity. First, following a liquidity shock, the controlling blockholder is forced to sell, possibly to a less efficient acquirer. Second, this sale may occur at a fire sale price.
Third, absent a liquidity shock, a trade occurs only if a potential buyer arrives. Using a structural estimation approach and U.S. data on trades of controlling blocks of public corporations, we estimate the value of control, the blockholders’ marketability discount and the dispersed shareholders' illiquidity-spillover discount.
For decades and decades, Delaware has been the undisputed leader in the market for corporate law. And yet, it is now clear that Delaware’s superiority...
The EU Takeover Bids Directive was passed twenty years ago with the main objective of promoting a single European takeover market. The primary mechanism...
The E.U. Takeover Directive was passed twenty years ago with the main aim of fostering a single European takeover market. However, subsequent economic,...