Two Theories of Control

BVResearch Pro
American Society of Appraisers Business Valuation Review™
Fall 2016 Volume 35, Issue 3 pp. 103-111
Eric Sundheim, ASA
Jordan Sundheim, MA, BA
discounts & premiums
control premium

Summary

This paper identifies two different theories of control premiums: One theory supposes control only benefits controlling shareholders; the other supposes control benefits all shareholders. We first examine the logical implications of each theory. We then examine the implications of each theory on the relationship between the magnitude of a control premium percentage and the percentage of controlling ownership. We analyze a database that is commonly used to quantify control premium percentages and do not find evidence to support either theory on the basis of this relationship.
Two Theories of Control
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