Abstract

http://ssrn.com/abstract=2138949
 


 



Catering Incentives and Corporate Governance: Evidence from the Dismissal of Dual Class Shares in the U.K.


Fabio Braggion


Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg University - European Banking Center

Mariassunta Giannetti


Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

July 15, 2015

ECGI - Finance Working Paper No. 375

Abstract:     
In the U.K., between 1955 and 1970, dual class shares went from being very popular to be nearly dismissed, without any regulatory interventions. We show that market-based measures of investor demand for one-share-one-vote, constructed following Baker and Wurgler (2004a), are negatively related to the use of dual class share structures. We provide evidence showing that investor demand is related to the tone and the intensity of a debate on dual class shares in which no new material information was revealed and that voting shares exhibit lower returns than limited-voting shares following periods for relatively high demand for one-share-one-vote. Our results suggest that non-fundamental investor demand may have limited firms’ ability to use dual class shares and have broader implications for corporate governance.

Number of Pages in PDF File: 55

Keywords: Corporate Governance, Dual Class Shares, Public Debate

JEL Classification: G02, G1, G3


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Date posted: September 1, 2012 ; Last revised: July 16, 2015

Suggested Citation

Braggion, Fabio and Giannetti, Mariassunta, Catering Incentives and Corporate Governance: Evidence from the Dismissal of Dual Class Shares in the U.K. (July 15, 2015). ECGI - Finance Working Paper No. 375. Available at SSRN: http://ssrn.com/abstract=2138949 or http://dx.doi.org/10.2139/ssrn.2138949

Contact Information

Fabio Braggion
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Tilburg University - European Banking Center ( email )
PO Box 90153
Tilburg, 5000 LE
Netherlands
Mariassunta Giannetti (Contact Author)
Stockholm School of Economics ( email )
P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)
HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

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