Tender Offers versus Block Trades: Empirical Evidence

In this paper we test whether the determinant of a block trade and tender offer probabilities differ and whether the relative magnitude of the security and private benefits can explain the choice of transfer mode. We investigate the Swedish market for corporate control and use the wedge between cash flow rights and voting rights as a proxy for the incentives to extract private benefits. Our results indicate the importance of considering the control transfers through takeovers and block trades as two distinctive events. The likelihood of a public tender offer (block trade) decreases (increases) with the use of dual class shares. The results are consistent with our general hypothesis that the likelihood of block trades relative to public tender offers increases with the incumbent’s incentives to extract private benefits.