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Relative Prices of Dual Class Shares

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Author Info
Smith, Brian F.
Amoako-Adu, Ben
Abstract

Empirical studies of dual class shares indicate that superior voting shares (SVS) sell at a premium relative to their counterpart restricted shares (RVS). This paper uses Toronto Stock Exchange data to show that SVS price premium over RVS reflects the expected takeover premium paid to shareholders outside the control block. Thus, marginal shareholders pay a higher SVS price in anticipation of receiving a differential takeover bid as suggested by the extra merger hypothesis. Further analysis indicates that voting power increases the price premium while ownership, size, and the higher trading liquidity of RVS are inversely related to the premium.

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File URL: http://journals.cambridge.org/abstract_S0022109000000193
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Publisher Info
Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 30 (1995)
Issue (Month): 02 (June)
Pages: 223-239
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:cup:jfinqa:v:30:y:1995:i:02:p:223-239_00

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  1. Petya Koeva Brooks & Iryna V. Ivaschenko, 2008. "Corporate Governance Reforms in the EU: Do They Matter and How?," IMF Working Papers 08/91, International Monetary Fund. [Downloadable!]
  2. Anete Pajuste, 2005. "Determinants and consequences of the unification of dual-class shares," Working Paper Series 465, European Central Bank. [Downloadable!]
  3. Alexander Muravyev, 2007. "Dual Class Stock in Russia: What Explains the Price Differential between Common and Preferred Shares?," Discussion Papers of DIW Berlin 680, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  4. Shmuel Hauser & Beni Lauterbach, 2000. "The Value of Voting Rights to Majority Shareholders: Evidence from Dual Class Stock Unifications," University of California at Los Angeles, Anderson Graduate School of Management 1055, Anderson Graduate School of Management, UCLA. [Downloadable!]
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  5. Ken Bechmann & Johannes Raaballe, 2003. "A Regulation of Bids for Dual Class Shares. Implication: Two Shares—One Price," European Journal of Law and Economics, Springer, vol. 15(1), pages 17-46, January. [Downloadable!] (restricted)
  6. Muravyev Alexander, 2004. "The Puzzle of Dual Class Stock in Russia. Explaining the Price Differential between Common and Preferred Shares," EERC Working Paper Series 04-07e, EERC Research Network, Russia and CIS. [Downloadable!]
  7. William N. Goetzmann & Matthew Spiegel & Andrey Ukhov, 2003. "Modeling and Measuring Russian Corporate Governance: The Case of Russian Preferred and Common Shares," NBER Working Papers 9469, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Michael R. King & Dan Segal, 2006. "The Long-Term Effects of Cross-Listing Investor Recognition, and Ownership Structure on Valuation," Working Papers 06-44, Bank of Canada. [Downloadable!]
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