Prague Economic Papers 2017, 26(1):36-54 | DOI: 10.18267/j.pep.592

The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania

Victor Dragotă1, Radu Ciobanu2
1 Bucharest University of Economic Studies, Faculty of Finance, Insurance, Banking and Stock Exchange, Department of Finance and CEFIMO, Bucharest, Romania (victor.dragota@fin.ase.ro)
2 Bucharest University of Economic Studies, Faculty of Finance, Insurance, Banking and Stock Exchange, Department of Finance and CEFIMO, Bucharest, Romania (radu.ciobanu@fin.ase.ro)

Most of the studies regarding control premium are focussed on the case in which it is positive. We considered the case when it is negative, investigating the determinants of the discount for control, having as study case the Romanian listed companies. Comparative to the general case of control premium, discounts for control are also determined by some other specific factors, like the number of non-trading days and the cash ratio. Some determinant factors of control premium have an opposite influence when this is negative: the percentage of shares purchased in the transaction, the ownership concentration, the fact the buyer or the seller is domestic, and the existence of a major shareholder owning more than 50% of shares. Consequently, some factors usually used in explaining the control premium cannot be suitably used for the case of the discount for control. Moreover, the negative impact of the undiversified portfolio is validated.

Keywords: control premium, discount offer, discount for control, mergers and acquisitions, agency problems, Romania
JEL classification: G34

Prepublished online: July 14, 2016; Published: February 1, 2017  Show citation

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Dragotă, V., & Ciobanu, R. (2017). The Unusual Case of the Discount Offers for Taking the Control: Evidence from Romania. Prague Economic Papers, 26(1), 36-54. doi: 10.18267/j.pep.592
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