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

Marco Becht (), Yuliya Kamisarenka and Anete Pajuste

No 2018-10, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

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 prereform 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-shareone- vote; Coase theorem (search for similar items in EconPapers)
Pages: 53 p.
Date: 2018-04
New Economics Papers: this item is included in nep-cdm, nep-eur and nep-pol
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