Working Paper: CEPR ID: DP12892
Authors: Marco Becht; Yuliya Kamisarenka; Anete Pajuste
Abstract: French listed companies can issue shares that confer two votes per share after a holding period of at least two years (loyalty shares with tenure voting rights). In 2014 the default rule changed from one-share-one-vote to loyalty shares. The Coase theorem predicts that ceteris paribus shareholders rewrite the corporate charter to preserve the pre-reform structure. The theorem also predicts that the proportion of loyalty shares in initial public offerings is unchanged. The paper shows that most one-share-one-vote companies reverted to the pre-reform contract. The exception were firms with a stake held by the French state. In initial public offerings, the new default rule had an impact; the proportion of loyalty share statutes increased from about forty to fifty percent after the passage of the law. Companies that kept the same statutes have a significantly higher market to book ratio than companies forced into a different regime. The evidence is broadly consistent with the predictions of the Coase theorem, but only in the absence of conflicted parties with veto power.
Keywords: loyalty shares; tenure voting; time-phased voting; dual-class shares; one-share-one-vote; Coase theorem
JEL Codes: D23; K22; G32; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| loi Florange (L59) | proportion of loyalty share statutes (G35) |
| loi Florange (L59) | shareholder preferences (G35) |
| one-share-one-vote structure (G34) | market valuations (G19) |
| loyalty shares with tenure voting (G34) | average holding periods (C41) |
| French state as shareholder (G34) | voting processes outcomes (D72) |