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Majority and Minority Ownership of Publicly‐Traded Firms: A Test of the Value of Control Using Market Multiples

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  • Roger C. Graham Jr
  • Craig E. Lefanowicz

Abstract

Publicly‐traded companies that are controlled by other publicly‐traded companies provide a unique setting in which to test whether the market values of majority and minority ownership interests are proportionate to their ownership percentages. Test results indicate that the value of subsidiary net assets and net income are greater to majority shareholders than to minority shareholders. However, comparison of asset and income valuation with a sample of diffusely‐held firms indicates that this valuation asymmetry is not due to a wealth transfer from the minority to the majority owners but to a discounting of the portion of the subsidiary owned by the minority shareholders.

Suggested Citation

  • Roger C. Graham Jr & Craig E. Lefanowicz, 1999. "Majority and Minority Ownership of Publicly‐Traded Firms: A Test of the Value of Control Using Market Multiples," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(1‐2), pages 171-198, January.
    • Handle: RePEc:bla:jbfnac:v:26:y:1999:i:1-2:p:171-198
    DOI: 10.1111/1468-5957.00252
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    Cited by:

    1. Roger C. Graham & Craig E. Lefanowicz & Kathy R. Petroni, 2003. "The Value Relevance of Equity Method Fair Value Disclosures," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1065-1088, September.
    2. Kee‐Hong Bae & Seok Woo Jeong, 2007. "The Value‐relevance of Earnings and Book Value, Ownership Structure, and Business Group Affiliation: Evidence From Korean Business Groups," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(5‐6), pages 740-766, June.

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