The Media and Firm Reputation Roles in Corporate Governance Improvements: Lessons from European Dual Class Share Unifications

Abstract

We study to what extent media pressure and firm's reputational concerns encourage corporate governance improvements. Our test sample comprises 72 European dual-class-shares firms that voluntarily unified their shares into a single class. We find that when the press' anti-dual-class-shares sentiment intensifies, the dual class firms' market valuation discount deepens, and the rate of unifications increases. We also show that dual-class firms that are more sensitive to public image (firms on the eve of an equity offering, and firms that invest more in Corporate Social Responsibility activities) are more likely to unify their dual class shares.