Encouraging Long-Term Shareholders: The Effects of Loyalty Shares with Double Voting Rights

43 Pages Posted: 29 Oct 2019

See all articles by Francois Belot

Francois Belot

Université de Cergy-Pontoise

Edith Ginglinger

Université Paris-Dauphine, PSL Research University; European Corporate Governance Institute (ECGI)

Laura T. Starks

University of Texas at Austin - Department of Finance

Date Written: October 25, 2019

Abstract

The 2014 passage of the Florange Act in France changed an opt-in provision for loyalty shares (allocating a second voting right for shares held at least two years) to an opt-out provision with shareholder approval. We find that before 2014, loyalty shares were popular among small family firms. Following the Act, firms with a one share – one vote structure that announced they would opt out of the law incurred a negative market reaction, suggesting that shareholders have a positive perception of loyalty shares. It appears that by encouraging costly monitoring by long-term shareholders, loyalty shares can potentially benefit all shareholders.

Suggested Citation

Belot, Francois and Ginglinger, Edith and Starks, Laura T., Encouraging Long-Term Shareholders: The Effects of Loyalty Shares with Double Voting Rights (October 25, 2019). Université Paris-Dauphine Research Paper No. 3475429, Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3475429 or http://dx.doi.org/10.2139/ssrn.3475429

Francois Belot (Contact Author)

Université de Cergy-Pontoise ( email )

THEMA
33 boulevard du Port
Cergy-Pontoise Cedex, 95011
France
+33 1 34 25 62 33 (Fax)

Edith Ginglinger

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

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