Why do holding companies in pyramidal groups trade at a discountWhy do holding companies in pyramidal groups trade at a discount
Faculty of Applied Economics
Accountancy and Finance
Antwerp :UA, 2004[*]2004
Research paper / UA, Faculty of Applied Economics ; 2004:007
University of Antwerp
Holding companies, which play an important role in corporate finance in Belgium and in other Continental European countries, often trade at a discount to their estimated net asset value (NAV). First, we discuss possible explanations for this discount: holding company destroys value, NAV overestimates actual value, noise traders cause underpricing, and private benefits of control. Second, we investigate the discount of the Belgian holding company Cobepa, for which detailed information on the calculation of the NAV was available. We can exclude the first three explanations for the Cobepa case, we cannot rule out private benefits as an explanation.