Why do holding companies in pyramidal groups trade at a discount?
AbstractHolding companies, which play an important role in corporate finance in Belgium and in other Continental European contries, often trade at a discount to their estimated net asset value (NAV). First, we discuss possible explanations for this discount: holding company destroys value, NAV overestimates actual value, noise traders cause underpricing, and private benefits of control. Second, we investgate the discount of the belgian holding company Cobepa, for which detailed information on the calculation of the NAV was available. We can exclude the first three explanations for the Cobepa case, we cannot rule out private benefits as an explanation.
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Bibliographic InfoPaper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2004007.
Length: 47 pages
Date of creation: May 2004
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Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-02 (All new papers)
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