Equity block transfers in transition economies: evidence from Poland
This paper investigates the valuation effects of share block transfers and employs agency theory to explain the determinants of equity block premia. A sample of transactions from Poland is used to measure the benefits and costs of ownership concentration. Block premia are found to be substantially lower than in well-developed markets, in spite of the weaker minority shareholders’ protection in transitional economies. Shareholders expect to benefit from intensified monitoring and from corporate restructuring resulting from block acquisitions (even if such acquisitions are not followed by a subsequent takeover). Still, shareholders are wary of the expropriation stemming from the extraction of private benefits of control by block holders. The opportunities to extract such benefits are found to depend not only on the size of the block holder’s stake, but also on the relative power of other investors. Finally, the results document a positive role of the State as an investor in listed companies.
Draft version dated December 2005 issued as working paper by University of Exeter. Final version published by Elsevier; available online at http://www.sciencedirect.com/
Vol. 3, Issue 32, pp. 217 - 238