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Index membership vs. loss of voting power: the unification of dual-class shares

Betzer, André, van den Bongard, Inga and Goergen, Marc 2017. Index membership vs. loss of voting power: the unification of dual-class shares. Journal of International Financial Markets, Institutions and Money 49 , pp. 140-153. 10.1016/j.intfin.2017.03.003

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A change in the index selection rules of Deutsche Börse provides a unique opportunity to investigate the drivers behind the decision to abolish dual-class shares. As of June 2002, selection is based on the market capitalization of the free-float of the more liquid share class rather than the overall market capitalization. Hence, firms have had to reassess the benefits from their dual-class shares by weighing them against the cost from foregone index weight associated with having two share classes. Our findings suggest that index membership significantly affects the controlling shareholder’s motivation to unify preferred and common stock.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HG Finance
Uncontrolled Keywords: Private benefits of control; Dual-class stock; Ownership structure; Corporate governance
Publisher: Elsevier
ISSN: 1042-4431
Date of First Compliant Deposit: 5 April 2017
Date of Acceptance: 26 March 2017
Last Modified: 12 May 2018 00:56

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