Premium
Block Premia, Litigation Risk, and Shareholder Protection
Author(s) -
Maux Julien Le,
Francoeur Claude
Publication year - 2014
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12005
Subject(s) - expropriation , shareholder , business , risk premium , monetary economics , value (mathematics) , anticipation (artificial intelligence) , finance , economics , corporate governance , market economy , machine learning , artificial intelligence , computer science
Blocks of shares are typically traded at a premium for the buyer. The academic literature shows that anticipated private benefits are the main determinant of this premium rather than the projected value of future synergies. The results of this study indicate that a target's litigation risk has a significant impact on the control premium. Acquirers tend to lower block premia significantly in anticipation of potential litigation related to financial disclosure or the target's market value. Legal shareholder protection also plays a significant role in countering shareholder expropriation. Block buyers pay higher premia to acquire targets that operate in protective legal environments .