Changing Corporate Governance Norms: Evidence from Dual Class Shares in the U.K.

49 Pages Posted: 1 Sep 2012 Last revised: 16 May 2017

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

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Date Written: May 10, 2017

Abstract

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 undervalued. These and other results suggest that investor demand may lead firms to abandon dual class shares.

Keywords: Corporate Governance, Dual Class Shares, Investor Demand, Public Debate

JEL Classification: G3, G1, N24

Suggested Citation

Braggion, Fabio and Giannetti, Mariassunta, Changing Corporate Governance Norms: Evidence from Dual Class Shares in the U.K. (May 10, 2017). Journal of Financial Intermediation, Forthcoming; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 375/2013 . Available at SSRN: https://ssrn.com/abstract=2138949 or http://dx.doi.org/10.2139/ssrn.2138949

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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