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Why do holding companies in pyramidal groups trade at a discount?

  • ROMMENS, An
  • DELOOF, Marc
  • JEGERS, Marc
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    Holding companies, which play an important role in corporate finance in Belgium and in other Continental European countries, 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 investigate 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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    Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2004007.

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    Length: 48 pages
    Date of creation: Apr 2004
    Date of revision:
    Handle: RePEc:ant:wpaper:2004007
    Contact details of provider: Postal: Prinsstraat 13, B-2000 Antwerpen
    Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/

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