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

Author

Listed:
  • François Belot

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Edith Ginglinger

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Laura Starks

    (Université of Texas at Austin)

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.

Suggested Citation

  • François Belot & Edith Ginglinger & Laura Starks, 2024. "Encouraging long-term shareholders: The effects of loyalty shares with double voting rights," Post-Print hal-05623253, HAL.
    • Handle: RePEc:hal:journl:hal-05623253
    DOI: 10.3917/fina.pr.026
    as

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