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Determinants and consequences of the unification of dual-class shares

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  • Pajuste, Anete

Abstract

This paper explores the reasons why an increasing number of firms in continental Europe are unifying their shares into a single class, and analyzes the consequences of this restructuring. Interestingly, recent changes in corporate governance environment have created a situation when the reasons that once caused the introduction of dual-class shares, i.e., the need to issue new equity and to defend firm from a possible takeover, are the same that now motivate firms to switch back to one share-one vote. Meanwhile, higher value of control rights (e.g., high separation between control and cash flow rights) significantly reduces the likelihood of unification. Finally, the data show that firm value increases after the unification. JEL Classification: G32, G34

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0465.

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Date of creation: Mar 2005
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Handle: RePEc:ecb:ecbwps:20050465

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Keywords: Corporate governance; dual-class shares; one share-one vote;

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Citations

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Cited by:
  1. At, Christian & Burkart, Mike & Lee, Samuel, 2007. "Security-Voting Structure and Bidder Screening," CEPR Discussion Papers 6241, C.E.P.R. Discussion Papers.
  2. Yishay Yafeh & Beni Lauterbach, 2009. "Long Term Changes in Voting Power and Control Structure following the Unification of Dual Class Shares," Working Papers 2009.112, Fondazione Eni Enrico Mattei.
  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.
  4. Lauterbach, Beni & Yafeh, Yishay, 2011. "Long term changes in voting power and control structure following the unification of dual class shares," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 215-228, April.
  5. Caprio, Lorenzo & Croci, Ettore, 2008. "The determinants of the voting premium in Italy: The evidence from 1974 to 2003," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2433-2443, November.
  6. 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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