The study explores the existence and magnitude of private benefits of control in the banking industry around the world. By analyzing 157 control-transfer transactions for banks in 40 countries, we are able to detect the existence of an average 3.3% block transaction premium as a measure of private benefits of control. Consistent with the legal origin theory about the protection of minority shareholders, we find that banks operating in French civil law regimes show on average higher premiums than the banks operating in other legal frameworks. The paper also investigates to what extent regulation and public policies can curb those benefits thus enhancing bank governance. While bank-specific regulation generally does not seem to have a substantial impact on private benefits of control, the regulation on entry appears to play a moderate role in curbing those benefits.
Private Benefits of Control in the Banking Industry: A Cross-Country Analysis
GIANFRATE, GIANFRANCO;ZANETTI, LAURA
2012
Abstract
The study explores the existence and magnitude of private benefits of control in the banking industry around the world. By analyzing 157 control-transfer transactions for banks in 40 countries, we are able to detect the existence of an average 3.3% block transaction premium as a measure of private benefits of control. Consistent with the legal origin theory about the protection of minority shareholders, we find that banks operating in French civil law regimes show on average higher premiums than the banks operating in other legal frameworks. The paper also investigates to what extent regulation and public policies can curb those benefits thus enhancing bank governance. While bank-specific regulation generally does not seem to have a substantial impact on private benefits of control, the regulation on entry appears to play a moderate role in curbing those benefits.
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