Agency Problems and Synergistic Effects in Romania: The Determinants of the Control Premium

Estimation of the control premium remains one of the main concerns in the financial literature: different approaches take into consideration synergistic effects, agency problems, and the bargaining power of different agents. We estimated the level of the control premium and its determinants for Romanian listed companies in the period 2000–2011. The median of the control premium was 25%. Using a linear regression model, we found that the determinants of the control premium for Romanian listed companies are similar to those revealed for other countries. The control premium was directly related to the liquidity of the shares of the acquired company before the transaction, to the percentage share purchased in the transaction, and to the ownership concentration of the acquired company. Also, its level was higher if the buyer was a corporation, and also if the acquirer, or the majority shareholder before the transaction, was Romanian. The control premium was inversely related to the size of the acquired company, to the bargaining power of the buyer, and to the fact that the acquirer was already a shareholder of the target company. The control premium increases if the target company has a majority shareholder, or at least shareholders owning more than 33% of the equity capital, before the transaction, but decreases if the ownership is dispersed. Moreover, we find that the sector of the target company has an influence on the control premium. Thus, if the firm was active in services or in the machinery and equipment industry, the control premium was higher, while if it was active in agriculture, construction, the food industry, or the chemicals industry it was lower.