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Private Benefits of Control and Dual‐Class Share Unifications
Author(s) -
Maury Benjamin,
Pajuste Anete
Publication year - 2011
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1538
Subject(s) - shareholder , valuation (finance) , limiting , private benefits of control , dual (grammatical number) , unification , cash flow , business , control (management) , sample (material) , discounted cash flow , economics , cash , monetary economics , finance , accounting , corporate governance , computer science , art , chemistry , literature , management , chromatography , engineering , programming language , mechanical engineering
This paper examines the decision to unify dual‐class shares into a single class. Using a sample of firms from seven European countries, we find that measures of lower private benefits of control available to the controlling shareholders, such as low separation between control and cash flow centers, the presence of financial investors, and cross‐listings, increase the likelihood of a unification of share classes. Unifications are also more likely in firms with higher growth opportunities that need external financing. Changes in the institutional environment aimed at limiting the powers of controlling shareholders are positively related to unifications. Increases in firm valuation are found for the year following unifications. Copyright © 2011 John Wiley & Sons, Ltd.