Ownership Dispersion and the London Stock Exchange’s 'Two-Thirds Rule': An Empirical Test
Brian R. Cheffins
University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)
Dmitri K. Koustas
University of California, Berkeley - Department of Economics
University of Cambridge - Judge Business School, Department of Finance & Accounting
June 27, 2012
University of Cambridge Faculty of Law Research Paper No. 17/2012
In the UK, in contrast to most other countries, a hallmark of corporate governance is a separation of ownership and control. There is evidence suggesting that this pattern may have been the norm in Britain as far back as the late 19th century. This paper investigates the extent to which law, in the form of a London Stock Exchange listing rule that prohibited the quotation of a class of securities unless two-thirds of the securities quoted had been subscribed for by and allotted to the public, contributed to this outcome. This paper tests the impact of the two-thirds rule by analysing for domestically based companies that carried out initial public offerings between 1900 and 1911 data compiled from prospectuses, a UK investors’ guide and documents filed in accordance with UK companies legislation. The results indicate that the two-thirds rule did not influence ownership and control to the extent that might have been anticipated.
Number of Pages in PDF File: 47
Keywords: law and finance, London Stock Exchange, initial public offerings, securities regulation
JEL Classification: G38, K22, N43working papers series
Date posted: June 27, 2012 ; Last revised: July 18, 2012
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