Control Premiums and the Value of the Closely-Held Firm

Authors

Walt Schubert, La Salle University
Les Barenbaum, La Salle University and Financial Research, Inc

Abstract

This paper demonstrates that control premiums are warranted in the valuation of closely-held firms when perquisites exist. The value of control is a function of the ownership structure and the size of perquisite cash flows. The conventional logic of assigning control premiums based upon transactions in the public market is shown to be flawed. A statistic for calculating control premiums based on ownership structure and the size of perquisite flows is developed. The paper closes with a short discussion of how minority discounts and control premiums are related.

JEL Codes

G32

Keywords

Control Premium, Valuation, Closely Held, Small Firm

Recommended Citation

Schubert, Walt and Barenbaum, Les (1991) "Control Premiums and the Value of the Closely-Held Firm," Journal of Small Business Finance: Vol. 1: Iss. 2, pp. 155-159.
DOI: https://doi.org/10.57229/2373-1761.1119
Available at: https://digitalcommons.pepperdine.edu/jef/vol1/iss2/5