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Publication type: Article
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Title: |
The Value of Control and the Costs of Illiquidity
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Author(s): |
ALBUQUERQUE,RUI
(Author)
SCHROTH,ENRIQUE
(Author)
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Source Journal Info. |
Title:The Journal of Finance
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Issue Number:2015/AUG V.70 N.4
Call No.:332.05 JFI Location: References & Periodical Hall - 2nd floor
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Physical Description: |
p 1405-1455
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Subject Area: |
Economics
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Subject Terms: |
Economics
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Accession Number |
141239
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Abstract
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We develop a search model of block trades that values the illiquidity of controlling stakes. The model considers several dimensions of illiquidity. First, following a liquidity shock, the controlling blockholder is forced to sell, possibly to a less efficient acquirer. Second, this sale may occur at a fire sale price. Third, absent a liquidity shock, a trade occurs only if a potential buyer arrives. Using a structural estimation approach and U.S. data on trades of controlling blocks of public corporations, we estimate the value of control, blockholders' marketability discount, and dispersed shareholders' illiquidity-spillover discount. ...
Abstract URL:http://onlinelibrary.wiley.com/doi/10.1111/jofi.12207/abstract
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