Dual Class Stock in Russia: Explaining a Pricing Anomaly
AbstractThis paper studies the determinants of the unusually high and volatile price differential between common (voting) shares and preferred (nonvoting) shares in Russia's emerging stock market. It focuses on three potential explanations for the price spread between these two classes of stock: the control contest model of the voting premium, the inferior liquidity of preferred shares, and the risk of expropriation of preferred shareholders as a class. The regression analysis, based on data from 1997 to 2005, supports the control contest explanation and the liquidity argument. The hypothesis of expropriation of preferred shareholders as a class receives limited support, and only in the early period of the Russian stock market's development. The paper addresses the issue of structural breaks in the evolution of the price differential, related to the 1998 financial crisis and to improvements in investor protection in Russia in the early 2000s. It also provides new estimates of the magnitude of the private benefits of control in Russian companies.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 45 (2009)
Issue (Month): 2 (March)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
corporate governance; dual class shares; Russia; voting premium;
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- Muravyev, Alexander, 2009. "Investor Protection and the Value of Shares: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in Russia," IZA Discussion Papers 4669, Institute for the Study of Labor (IZA).
- Muravyev, Alexander & Berezinets, Irina & Ilina, Yulia, 2012.
"Корпоративные Конфликты И Политика Фирм В Области Занятости И Заработной Платы
[Corporate Governance Conflicts and Employment and," MPRA Paper 40215, University Library of Munich, Germany.
- Berezinets, Irina & Ilina, Yulia & Muravyev, Alexander, 2011. "CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange," IZA Discussion Papers 6256, Institute for the Study of Labor (IZA).
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