Changing Corporate Governance Norms: Evidence from Dual Class Shares in the U.K.
Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg University - European Banking Center
Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance
March 24, 2017
ECGI - Finance Working Paper No. 375
In the U.K., between 1955 and 1970, dual class shares quickly lost popularity without any regulatory intervention. The decline in the use of dual class shares was positively correlated with the relative valuations of one-share-one-vote and dual class firms, which in turn were related to media pessimism on the use of dual class shares. Following periods with high relative valuations of one-share-one-vote, one-share-one-vote firms exhibited lower returns than dual class firms suggesting that the latter were relatively undervalued. These and other results suggest that investor demand may lead firms to abandon dual class shares.
Number of Pages in PDF File: 50
Keywords: Corporate Governance, Dual Class Shares, Investor Demand, Public Debate
JEL Classification: G3, G1, N24
Date posted: September 1, 2012 ; Last revised: February 25, 2017