Is the Corporate Control Market Segmented?

Abstract

Gorbenko and Malenko (2014) propose a segmented-market perspective. We extend the literature by directly testing if a segmented-market perspective helps explain the premium difference between private and public acquisitions. Empirically, we follow Fidrmuc et al. (2012) and use a matched sample design. We find that private acquirers do not pay less than public acquirers when controlling for the selling mechanism (which characterizes different corporate control markets) as well as the effects of outliers. Our results suggest that premium differences between private and public acquisitions may be more consistent with a segmented-market perspective as opposed to the agency explanation of Bargeron et al. (2008).

TOPICS: Private equity, Performance measurement