PRIVATE BENEFITS OF CONTROL: EVIDENCE FROM SINGAPORE

Abstract

This paper examines 152 negotiated trades from 1988 to 2005, each involving a Singapore public listed company as the target. It is observed that one-in-two trades had the acquirer paying zero or negative premium. Further examinations reveal that zero and negative premiums are mainly paid for targets that are in considerable distress and the motivation behind these trades is to extract assets from the target for the private usage of the block acquirer. The average premium paid for healthy targets is 19.8%. This should reflect the level of private benefits of control in this country. The average premium paid of targets in distress is -14.2%. This figure measures the private cost of control of a company in distress. Other results are consistent with the view that private benefits of control do exist in Singapore.