Private Benefits of Control and Dual-Class Share Unifications

✍ Scribed by Benjamin Maury; Anete Pajuste

• Book ID: 102501871
• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 173 KB
• Volume: 32
• Category: Article
• ISSN: 0143-6570
• DOI: 10.1002/mde.1538

✦ Synopsis

This paper examines the decision to unify dual-class shares into a single class. Using a sample of firms from seven European countries, we find that measures of lower private benefits of control available to the controlling shareholders, such as low separation between control and cash flow rights, the presence of financial investors, and cross-listings, increase the likelihood of a unification of share classes. Unifications are also more likely in firms with higher growth opportunities that need external financing. Changes in the institutional environment aimed at limiting the powers of controlling shareholders are positively related to unifications. Increases in firm valuation are found for the year following unifications.