The value of corporate control and corporate governance

This dissertation examines the private benefits of corporate control and analyzes their determinants. The existence of exclusive benefits of control signifies the existence of an agency problem, and calls for effective corporate governance practices in order to restrain the extraction of benefits. Using the block premium and voting premium approaches, I add to the literature that examines the relationship between the magnitude of those private benefits and the nature of corporate governance practices.;In the first chapter, I introduce the issue of corporate control and corporate governance. The second chapter then estimates the magnitude of private benefits of control using the control block premium approach. Using a dataset of major shareholding changes of listed firms in Korea between 2001 and 2006, I find that the size of control premia is negatively associated with corporate governance practices. The size of control premia is relatively small, which suggests the size declined as a result of corporate governance reforms after the financial crisis of 1997-98. My results also suggest that private benefits increase with firm size and vary with industry differences in market competition.;In the third chapter, I estimate a company's voting premium which reflects the expected value of exclusive control benefits. Because the size of the voting premium depends on both the potential size of private benefits of control and the probability of a control contest, its relationship to corporate governance practices differs across the dimensions of corporate governance. Using a sample of Korean dual-class firms listed between 2003 and 2006 that have both common (voting) and preferred (non-voting) shares and a corporate governance index constructed on five categories (i.e. shareholder protection, board, disclosures, audit, and distribution of profit), I examine the information that each category of a corporate governance practice provides regarding the size of voting premium. The results show that, among the different categories of corporate governance practices, only a company's shareholder protection has a significant, negative effect on the voting premium, suggesting that strong shareholder protection is the most important factor for limiting the extraction of private benefits of control.