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Encouraging long-term shareholders: The effects of loyalty shares with double voting rights

Author

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  • François Belot
  • Edith Ginglinger
  • Laura T. Starks

Abstract

Loyalty shares, which are mechanisms designed to encourage long-term share ownership through disproportional voting rights, face questions regarding their benefits and costs. We examine these questions through a natural experiment?the passage of the Florange Act in France?that required firms to adopt loyalty shares unless shareholders voted to opt out. We find differences in market reactions: negative for firms opting out and positive for those newly adopting the shares. Providing comparative evidence across these firms and across the two-thirds of French firms that previously issued loyalty shares, we show how the benefits and costs of loyalty shares vary across firms. JEL classification: G32, G34

Suggested Citation

  • François Belot & Edith Ginglinger & Laura T. Starks, 2024. "Encouraging long-term shareholders: The effects of loyalty shares with double voting rights," Finance, Presses universitaires de Grenoble, vol. 45(1), pages 3-61.
    • Handle: RePEc:cai:finpug:fina_pr_026
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    Cited by:

    1. Bajo, Emanuele & Barbi, Massimiliano & Bigelli, Marco & Croci, Ettore, 2020. "Bolstering family control: Evidence from loyalty shares," Journal of Corporate Finance, Elsevier, vol. 65(C).

    More about this item

    Keywords

    Loyalty shares; one share-one vote; dual-class stock; long-term shareholders; blockholders; multiple voting rights; corporate governance; monitoring; R&D expenses;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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