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Private Benefits of Control: An International Comparison

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  • Dyck, Alexander
  • Zingales, Luigi

Abstract

Based on 412 control transactions between 1990 and 2000 we construct a measure of the private benefits of control in 39 countries. We find that the value of control ranges between –4% and +65%, with an average of 14%. As predicted by theory, in countries where private benefits of control are larger capital markets are less developed, ownership is more concentrated, and privatizations are less likely to take place as public offerings. We also analyse what institutions are most important in curbing these private benefits. A high degree of statutory protection of minority shareholders and high degree of law enforcement are associated with lower levels of private benefits of control, but so are a high level of diffusion of the press, a high rate of tax compliance, and a high degree of product market competition. A crude R-squared test suggests that the ‘non traditional’ mechanisms have at least as much explanatory power as the legal ones commonly mentioned in the literature. In fact, in a multivariate analysis newspapers’ circulation and tax compliance seem to be the dominating factors. We advance an explanation why this might be the case.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3177.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3177

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Keywords: financial development; investor protection; private benefits;

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References

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