Loyalty Shares with Tenure Voting - a Coasian bargain? Evidence from the Loi Florange Experiment

Marco Becht, Yuliya Kamisarenka and Anete Pajuste

No 12892, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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; Coase theorem; One-share-one- vote (search for similar items in EconPapers)
JEL-codes: D23 G32 G34 K22 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-cdm, nep-cfn, nep-eur and nep-exp
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Citations: View citations in EconPapers (3)

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Working Paper: Loyalty Shares with Tenure Voting - a Coasian bargain? Evidence from the Loi Florange Experiment (2018)
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