Price Premiums for Controlling Shares of Closely Held Bank Stock

This paper theoretically and empirically examines the relationship between controlling and minority share prices in closely held banks. For price premiums on controlling shares to exist, three conditions must be met: control must provide special benefits unavailable to minority shareholders; control group members, individually, must be able to exploit control benefits; and control shares must be effectively isolated from minority shares in the market. Empirical results confirm the existence of significant price premiums on controlling shares, averaging 50%-70%. Relatively small groups tend to dominate activity in the control shares market indicating that they value control more highly than larger groups.