The Value of Dual-Class Shares in Switzerland

Abstract

We analyze the effect of dual-class structures on shareholder value of Swiss companies. Switzerland presents an ideal setting for studying the deviations from the one share-one vote rule due to the traditional popularity of multiple share classes. After accounting for self-selection into dual or single share category, we find strong positive effect of dual-class shares on firm value. Analysis of acquisition activities reveals that dual-class firms do not perform worse in acquisitions; contrary to that, in the recent years or among firms with low and moderate market-to-book values the returns to acquisitions are improved due to the dual-class structure.