The Puzzle of Dual Class Stock in Russia. Explaining the Price Differential between Common and Preferred Shares

Muravyev Alexander ()
Authors registered in the RePEc Author Service: Александр Муравьев

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: This paper attempts to explain a large premium paid on common (voting) shares relative to preferred (non-voting) shares in the Russian stock market. Empirical analysis focuses on two main explanations relating the premium either to the voting right attached to common shares or to differences in liquidity between the two classes of stock. Two avenues through which the right to vote may give rise to the premium are distinguished. First, the presence of private benefits of control and the possibility of control contests may make the votes held by small investors pivotal, and therefore valuable. Second, non-voting shareholders may be expropriated as a class by voting shareholders. Case studies and regression analysis of RTS stock exchange data from 1997-2003 provide support for the control contest model of the premium as well as for the liquidity argument. The study finds no evidence that the premium is related to expropriation of preferred shareholders as a class.

Keywords: Russia; dual-class stock; voting premium; ownership structure; corporate governance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2004-03-23
New Economics Papers: this item is included in nep-cis, nep-fin and nep-tra
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Working Paper: The puzzle of dual class stock in Russia: Explaining the price differential between common and preferred shares (2004)
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