Loyalty Shares with Tenure Voting - Does the Default Rule Matter? Evidence from the Loi Florange Experiment

41 Pages Posted: 2 May 2018 Last revised: 14 Sep 2019

See all articles by Marco Becht

Marco Becht

Solvay Brussels School of Economics and Management (ULB); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Yuliya Kamisarenka

Independent

Anete Pajuste

Stockholm School of Economics, Riga; European Gorporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2018

Abstract

The contractual theory of the firm predicts that companies adopt charters that maximise firm value, regardless of the default rule. We test this proposition empirically around a major legal reform. French companies going public used to give shareholders one vote per share by default. The contracting parties could opt-out via a charter amendment granting double voting rights to shareholders holding the title for at least two years (tenure voting). In 2014 the rule was reversed and tenure voting became the default. Companies wishing to go public with one share – one vote needed to introduce a charter amendment. The new rule also applied to the stock of listed companies; without a charter amendment one share – one companies were switched to tenure voting. The empirical evidence is largely consistent with the predictions of contractarian theory. French IPO companies make flexible use of tenure voting and the change in default rule had no significant impact on the IPO flow or valuations. Companies that had listed already without tenure voting reverted to one share - one vote, unless the French state was the major shareholder.

Keywords: Loyalty shares, tenure voting, time-phased voting, dual-class shares, one-shareone-vote, Coase theorem

JEL Classification: D23, K22, G32, G34

Suggested Citation

Becht, Marco and Kamisarenka, Yuliya and Pajuste, Anete, Loyalty Shares with Tenure Voting - Does the Default Rule Matter? Evidence from the Loi Florange Experiment (April 1, 2018). European Corporate Governance Institute (ECGI) - Law Working Paper No. 398/2018. Available at SSRN: https://ssrn.com/abstract=3166494 or http://dx.doi.org/10.2139/ssrn.3166494

Marco Becht (Contact Author)

Solvay Brussels School of Economics and Management (ULB) ( email )

42 Avenue F. D. Roosevelt
1050
Brussels, 1050
Belgium
+32 2 6504466 (Phone)

HOME PAGE: http://www.solvay.edu/profile/marcobecht

European Corporate Governance Institute (ECGI) ( email )

Palace of the Academies
Rue Ducale 1 Hertogstraat
Brussels, 1000
Belgium

HOME PAGE: http://www.ecgi.global/users/marco-becht

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yuliya Kamisarenka

Independent ( email )

No Address Available

Anete Pajuste

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

European Gorporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Register to save articles to
your library

Register

Paper statistics

Downloads
246
Abstract Views
963
rank
127,668
PlumX Metrics