The Long-Term Valuation Effects of Voluntary Dual Class Share Unifications

Abstract

We study 121 voluntary dual class share unification in Europe during 1996-2009, and uncover a mixed tale of governance improvements and shareholder expropriation. Corporate governance improvement is attained by abolishing the wedge between ownership and voting rights and by significantly decreasing controlling shareholders' voting power. Shareholder expropriation occurs when some controlling shareholders exploit the unification hype to sell part or all of their holdings at inflated prices. On average, the corporate governance positive valuation effects prevail, and voluntary unifications are accompanied by a statistically and economically significant increase of Q.