Trading is more than a personal valuation of own property. Traders try to anticipate the WTP potential buyers have for the good they want to sell. They do not focus on the value the entitlement has for them, their personal valuation is only a reservation price. The law analyzes the Endowment Effect because it wants to protect gains from trade; most economic and psychological Endowment Effect studies by contrast are concerned with a different question: They test theories of preference formation; unlike in trading behavior they focus the participants on their entitlement to demonstrate that valuation depends on ownership and expectations. We show in this study that an experimental design that focuses the subjects' attention on their good elevates the size of the Endowment Effect and can mislead the legal debate. Our experiment provides the subjects with incentives for strategic behavior. As typical for trading, the participants can earn more if they ask for a price that exceeds their personal valuation of the good they are endowed with. The incentives shift the attention of the subjects to the potential WTP of the buyer. The results we find show that the cognitively more complex trading task weakens the owners' occupation with their entitlement and significantly decreases their loss aversion. Our findings should apply to most business transactions, as strategic behavior is very common in professional relationships. The study suggests that the Endowment Effect is likely less prominent in real markets than often suggested and that private ordering may seldom need legal protection against it.
{"title":"Does the Endowment Effect Prevail When Traders Act Strategically?","authors":"Stephan Tontrup","doi":"10.2139/ssrn.3128015","DOIUrl":"https://doi.org/10.2139/ssrn.3128015","url":null,"abstract":"Trading is more than a personal valuation of own property. Traders try to anticipate the WTP potential buyers have for the good they want to sell. They do not focus on the value the entitlement has for them, their personal valuation is only a reservation price. The law analyzes the Endowment Effect because it wants to protect gains from trade; most economic and psychological Endowment Effect studies by contrast are concerned with a different question: They test theories of preference formation; unlike in trading behavior they focus the participants on their entitlement to demonstrate that valuation depends on ownership and expectations. We show in this study that an experimental design that focuses the subjects' attention on their good elevates the size of the Endowment Effect and can mislead the legal debate. Our experiment provides the subjects with incentives for strategic behavior. As typical for trading, the participants can earn more if they ask for a price that exceeds their personal valuation of the good they are endowed with. The incentives shift the attention of the subjects to the potential WTP of the buyer. The results we find show that the cognitively more complex trading task weakens the owners' occupation with their entitlement and significantly decreases their loss aversion. Our findings should apply to most business transactions, as strategic behavior is very common in professional relationships. The study suggests that the Endowment Effect is likely less prominent in real markets than often suggested and that private ordering may seldom need legal protection against it.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"117 S150","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-02-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91436060","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper sheds light on the short-term capital-market effects of all changes or amendments to International Financial Reporting Standards (IFRS) in the period between 2005 and 2014. The dynamic nature of IFRS is an interesting, yet underexplored setting. Since 2005 the International Accounting Standards Board (IASB) has adopted more than 100 changes to its accounting standards, claiming to improve transparency of financial reporting. We ask whether these standard changes are always for the better, or – at least sometimes – for the worse. Based on an international sample of more than 35,000 firm-year observations from 39 countries, we show that the IASB is generally compliant with its mission to increase the usefulness of financial reports for capital market participants. We however also show that positive capital market effects mainly arise when disclosure rules are changed whereas changing definition or measurement sections in accounting standards can also increase short-term opacity. Moreover, changing accounting standards may have adverse effects for firms closer to covenant violations. The paper contributes to the scarce literature on effects of (frequently) changing accounting standards.
{"title":"For Better or for Worse? The Economic Consequences of Frequent Accounting Standard Changes","authors":"Melanie Demirtas, J. R. Werner","doi":"10.2139/ssrn.3134789","DOIUrl":"https://doi.org/10.2139/ssrn.3134789","url":null,"abstract":"This paper sheds light on the short-term capital-market effects of all changes or amendments to International Financial Reporting Standards (IFRS) in the period between 2005 and 2014. The dynamic nature of IFRS is an interesting, yet underexplored setting. Since 2005 the International Accounting Standards Board (IASB) has adopted more than 100 changes to its accounting standards, claiming to improve transparency of financial reporting. We ask whether these standard changes are always for the better, or – at least sometimes – for the worse. Based on an international sample of more than 35,000 firm-year observations from 39 countries, we show that the IASB is generally compliant with its mission to increase the usefulness of financial reports for capital market participants. We however also show that positive capital market effects mainly arise when disclosure rules are changed whereas changing definition or measurement sections in accounting standards can also increase short-term opacity. Moreover, changing accounting standards may have adverse effects for firms closer to covenant violations. The paper contributes to the scarce literature on effects of (frequently) changing accounting standards.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"95 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86515938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the aftermath of the 2008 financial crisis, small businesses found it increasingly difficult to raise funds. Equity crowdfunding has emerged as a viable alternative for sourcing capital to support innovative, entrepreneurial ventures. Equity crowdfunding merges the complexity of public funding, with the systemic risks of venture capital funding.
A key responsibility of any securities regulator is that of investor protection. Securities laws, involving stringent eligibility criteria for fundraising companies and detailed disclosure requirements have been instrumental in mitigating risks for public retail investors to some extent. A number of securities regulators across the world have dealt with, or are in the process of dealing with equity crowdfunding as a disruptive innovation to established processes of corporate fundraising. However, most equity crowdfunding regulations do not take into account one critical aspect of crowdfunding - that of cross-border crowdfunding.
I argue that in jurisdictions where crowdfunding activities are unregulated or have a low threshold of regulations, the opportunities arising from the resultant regulatory arbitrage could then be used by fund-seeking companies based in jurisdictions where crowdfunding is prohibited or highly regulated. As a result, securities regulators must work together to derive minimum standards of acceptable behavior in cross-border crowdfunding markets.
This is a draft of a chapter that has been accepted for publication by Oxford University Press in the Oxford Handbook of IPOs edited by Douglas Cummings and Sofia Johan published in 2018. An earlier version of this paper was drafted as part of a visiting research fellowship at the Melbourne Law School. The author is grateful to Mr Lakshay Garg, BBALLB Class of 2013, Jindal Global Law School for his research assistance.
{"title":"Regulatory Arbitrage in Cross Border Crowdfunding","authors":"Arjya B. Majumdar","doi":"10.2139/ssrn.3115886","DOIUrl":"https://doi.org/10.2139/ssrn.3115886","url":null,"abstract":"In the aftermath of the 2008 financial crisis, small businesses found it increasingly difficult to raise funds. Equity crowdfunding has emerged as a viable alternative for sourcing capital to support innovative, entrepreneurial ventures. Equity crowdfunding merges the complexity of public funding, with the systemic risks of venture capital funding.<br><br>A key responsibility of any securities regulator is that of investor protection. Securities laws, involving stringent eligibility criteria for fundraising companies and detailed disclosure requirements have been instrumental in mitigating risks for public retail investors to some extent. A number of securities regulators across the world have dealt with, or are in the process of dealing with equity crowdfunding as a disruptive innovation to established processes of corporate fundraising. However, most equity crowdfunding regulations do not take into account one critical aspect of crowdfunding - that of cross-border crowdfunding.<br><br>I argue that in jurisdictions where crowdfunding activities are unregulated or have a low threshold of regulations, the opportunities arising from the resultant regulatory arbitrage could then be used by fund-seeking companies based in jurisdictions where crowdfunding is prohibited or highly regulated. As a result, securities regulators must work together to derive minimum standards of acceptable behavior in cross-border crowdfunding markets.<br><br>This is a draft of a chapter that has been accepted for publication by Oxford University Press in the Oxford Handbook of IPOs edited by Douglas Cummings and Sofia Johan published in 2018. An earlier version of this paper was drafted as part of a visiting research fellowship at the Melbourne Law School. The author is grateful to Mr Lakshay Garg, BBALLB Class of 2013, Jindal Global Law School for his research assistance.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"244 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87044957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An analysis as to how the moratorium declared under the provisions of the Insolvency & Bankruptcy Code, 2016 affects the enforcement of Financial Bank Guarantees.
关于根据《破产法》规定如何宣布暂停的分析;《2016年破产法》影响了金融银行担保的执行。
{"title":"Financial Bank Guarantees and Moratorium under IBC, 2016","authors":"Manoranjan Ayilyath","doi":"10.2139/ssrn.3675997","DOIUrl":"https://doi.org/10.2139/ssrn.3675997","url":null,"abstract":"An analysis as to how the moratorium declared under the provisions of the Insolvency & Bankruptcy Code, 2016 affects the enforcement of Financial Bank Guarantees.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"58 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84022044","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze firms' competition to steer an advisor's recommendations through potentially non-linear incentives. Even when firms are symmetric, so that the overall size of compensation would not distort advice when incentives were linear, advice is biased when firms are allowed to make compensation non-linear, which they optimally do. Policies that target an advisor's liability are largely ineffective, as firms react to such increased liability by making incentives even steeper, increasing bonus payments while reducing the linear (commission) part at the same time. This observation may justify policymakers' direct interference with firms' compensation practice, as frequently observed notably in consumer finance.
{"title":"Nonlinear Incentives and Advisor Bias","authors":"R. Inderst","doi":"10.2139/ssrn.3088484","DOIUrl":"https://doi.org/10.2139/ssrn.3088484","url":null,"abstract":"We analyze firms' competition to steer an advisor's recommendations through potentially non-linear incentives. Even when firms are symmetric, so that the overall size of compensation would not distort advice when incentives were linear, advice is biased when firms are allowed to make compensation non-linear, which they optimally do. Policies that target an advisor's liability are largely ineffective, as firms react to such increased liability by making incentives even steeper, increasing bonus payments while reducing the linear (commission) part at the same time. This observation may justify policymakers' direct interference with firms' compensation practice, as frequently observed notably in consumer finance.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"2016 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87822328","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-11-30DOI: 10.23895/KDIJEP.2017.39.4.51
Jungwook Kim, Subok Chae
This paper adapts the World Bank Regulatory Quality Index (RQI), which is produced annually to provide a better understanding of the effects of regulatory reforms, instead of the Production Market Regulation (PMR) indicators, which are published every five years. We find that 9.9 to 36.0 billion USD worth of regulatory cost could be reduced if the regulatory quality in Korea improves to the level of the OECD average considering that the total burden of regulation in Korea is estimated to range from 2.2 to 357.4 billion USD. The estimated reduction in the regulatory cost accounts for roughly 0.76 to 2.47% of Korea’ s GDP in 2013, underscoring the importance of regulatory reforms for the Korean economy. This paper introduces a new method with which to examine the distribution of regulatory costs across different industries and firm sizes. This alternative method is largely consistent with the conclusions reached by other studies, specifically that small firms typically bear a disproportionate regulatory burden.
{"title":"Economic Effects of Regulatory Reform in Korea","authors":"Jungwook Kim, Subok Chae","doi":"10.23895/KDIJEP.2017.39.4.51","DOIUrl":"https://doi.org/10.23895/KDIJEP.2017.39.4.51","url":null,"abstract":"This paper adapts the World Bank Regulatory Quality Index (RQI), which is produced annually to provide a better understanding of the effects of regulatory reforms, instead of the Production Market Regulation (PMR) indicators, which are published every five years. We find that 9.9 to 36.0 billion USD worth of regulatory cost could be reduced if the regulatory quality in Korea improves to the level of the OECD average considering that the total burden of regulation in Korea is estimated to range from 2.2 to 357.4 billion USD. The estimated reduction in the regulatory cost accounts for roughly 0.76 to 2.47% of Korea’ s GDP in 2013, underscoring the importance of regulatory reforms for the Korean economy. This paper introduces a new method with which to examine the distribution of regulatory costs across different industries and firm sizes. This alternative method is largely consistent with the conclusions reached by other studies, specifically that small firms typically bear a disproportionate regulatory burden.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"48 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77269083","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the U.S., Arkansas has the lowest interest rate cap on small-dollar installment loans, 17 percent. No small-dollar installment lenders operate within Arkansas, while they do in all six states bordering Arkansas. These facts provide a natural experiment to examine the effects of a binding interest rate cap because Arkansas residents actually obtain installment loans from out-state lenders. Arkansas residents in the perimeter counties hold 96.8 percent of these loans. Overall, Arkansas residents borrow $1,051, on average, and pay an average annual percentage rate (APR) of 80 percent. Incorporating estimated travel costs, the average APR is 93 percent.
{"title":"A Natural Experiment to Measure the Consequences of a Binding Interest Rate Cap","authors":"O. Lukongo, Thomas W. Miller","doi":"10.2139/ssrn.3059563","DOIUrl":"https://doi.org/10.2139/ssrn.3059563","url":null,"abstract":"In the U.S., Arkansas has the lowest interest rate cap on small-dollar installment loans, 17 percent. No small-dollar installment lenders operate within Arkansas, while they do in all six states bordering Arkansas. These facts provide a natural experiment to examine the effects of a binding interest rate cap because Arkansas residents actually obtain installment loans from out-state lenders. Arkansas residents in the perimeter counties hold 96.8 percent of these loans. Overall, Arkansas residents borrow $1,051, on average, and pay an average annual percentage rate (APR) of 80 percent. Incorporating estimated travel costs, the average APR is 93 percent.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81102086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper uses recently created datasets measuring legal change over time in a sample of 28 developed and emerging economies to test whether the strengthening of shareholder rights in the course of the mid-1990s and 2000s promoted stock market development in those countries. It finds only weak and equivocal evidence of a positive effect of shareholder protection on market capitalisation, the value of stock trading, and the turnover ratio, and a negative impact on the number of listed companies. There is stronger evidence of reverse causality, in the sense of stock market development at country level generating changes in shareholder protection law. We conclude, firstly, that legal reforms were at least in part an endogenous response to stock market development and not simply a reaction to the generation of global standards; but, secondly, that the laws passed in response to the demand for shareholder empowerment did not consistently have the expected impact on financial markets, and may have had some negative and perverse results.
{"title":"Is There a Relationship Between Shareholder Protection and Stock Market Development?","authors":"S. Deakin, Prabirjit Sarkar, M. Siems","doi":"10.2139/ssrn.3078529","DOIUrl":"https://doi.org/10.2139/ssrn.3078529","url":null,"abstract":"The paper uses recently created datasets measuring legal change over time in a sample of 28 developed and emerging economies to test whether the strengthening of shareholder rights in the course of the mid-1990s and 2000s promoted stock market development in those countries. It finds only weak and equivocal evidence of a positive effect of shareholder protection on market capitalisation, the value of stock trading, and the turnover ratio, and a negative impact on the number of listed companies. There is stronger evidence of reverse causality, in the sense of stock market development at country level generating changes in shareholder protection law. We conclude, firstly, that legal reforms were at least in part an endogenous response to stock market development and not simply a reaction to the generation of global standards; but, secondly, that the laws passed in response to the demand for shareholder empowerment did not consistently have the expected impact on financial markets, and may have had some negative and perverse results.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"26 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82906037","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Essay considers the preliminary results of an ongoing effort to discourage appraisal litigation. In the year since the August 2016 reforms to the Delaware appraisal statute, Chancery has issued a slew of at-or-below merger price appraisal opinions in cases such as Clearwire and PetSmart, while simultaneously pinioning fiduciary litigation by reiterating the principles of Corwin. The result — as one would expect when costs are raised and benefits are reduced — has been that fewer deals are being challenged via appraisal: In 1H 2017, the number of deals challenged fell by 33%. Those who successfully advocated for curbs on the practice had argued that appraisal claims lowered deal premia by incenting buyers to withhold top dollar, thereby hurting non-appraising shareholders. On their view, curtailment of appraisal should have sent premia upwards. But year to date the average U.S. target premium of 22.4% is the lowest of any year in recent history. The average target premium in 2Q 2017 of 19.3% was the single-lowest of the fifty prior quarterly observations; thus far, 3Q 2017, at 19.6%, is tracking as the second-lowest. Amid the pronounced decline in merger premia, change-in-control payouts have expanded as a percentage of transaction value. When analyzed in concert with other measures indicative of agent rent-seeking — such as target premium to 52-week high over varying periods — the evidence points to a substantial transfer of value from target shareholders to selling CEOs, who have adapted to an environment rendered more permissive by the weakening of the shareholder litigation ‘check’ that had formerly restrained such behavior.
{"title":"The High Cost of Fewer Appraisal Claims in 2017: Premia Down, Agency Costs Up","authors":"Matthew Schoenfeld","doi":"10.2139/ssrn.3028381","DOIUrl":"https://doi.org/10.2139/ssrn.3028381","url":null,"abstract":"This Essay considers the preliminary results of an ongoing effort to discourage appraisal litigation. In the year since the August 2016 reforms to the Delaware appraisal statute, Chancery has issued a slew of at-or-below merger price appraisal opinions in cases such as Clearwire and PetSmart, while simultaneously pinioning fiduciary litigation by reiterating the principles of Corwin. The result — as one would expect when costs are raised and benefits are reduced — has been that fewer deals are being challenged via appraisal: In 1H 2017, the number of deals challenged fell by 33%. Those who successfully advocated for curbs on the practice had argued that appraisal claims lowered deal premia by incenting buyers to withhold top dollar, thereby hurting non-appraising shareholders. On their view, curtailment of appraisal should have sent premia upwards. But year to date the average U.S. target premium of 22.4% is the lowest of any year in recent history. The average target premium in 2Q 2017 of 19.3% was the single-lowest of the fifty prior quarterly observations; thus far, 3Q 2017, at 19.6%, is tracking as the second-lowest. Amid the pronounced decline in merger premia, change-in-control payouts have expanded as a percentage of transaction value. When analyzed in concert with other measures indicative of agent rent-seeking — such as target premium to 52-week high over varying periods — the evidence points to a substantial transfer of value from target shareholders to selling CEOs, who have adapted to an environment rendered more permissive by the weakening of the shareholder litigation ‘check’ that had formerly restrained such behavior.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"120 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78933038","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Critics advocate eliminating dual class shares. We find that founding families control 89% of dual class firms, potentially confounding economic inferences regarding these structures. Using industry, market and Fama-French excess returns, we find a buy-and-hold strategy of dual class family firms, annually makes an additional 350 basis points over the benchmark. Institutional owners garner a disparate portion of these excess returns by holding over 87% of their floated shares. These investors demand a premium for holding dual-class family firms, suggesting a market-driven resolution to concerns about limited voting shares. In contrast, non-family dual class firms possess high stock valuations and insignificant excess returns. Overall, our analysis suggests that investors exhibit substantial concerns over family control rather than dual class structures.
{"title":"The Dual Class Premium: A Family Affair","authors":"Ronald C. Anderson, Ezgi Ottolenghi, D. Reeb","doi":"10.2139/ssrn.3006669","DOIUrl":"https://doi.org/10.2139/ssrn.3006669","url":null,"abstract":"Critics advocate eliminating dual class shares. We find that founding families control 89% of dual class firms, potentially confounding economic inferences regarding these structures. Using industry, market and Fama-French excess returns, we find a buy-and-hold strategy of dual class family firms, annually makes an additional 350 basis points over the benchmark. Institutional owners garner a disparate portion of these excess returns by holding over 87% of their floated shares. These investors demand a premium for holding dual-class family firms, suggesting a market-driven resolution to concerns about limited voting shares. In contrast, non-family dual class firms possess high stock valuations and insignificant excess returns. Overall, our analysis suggests that investors exhibit substantial concerns over family control rather than dual class structures.","PeriodicalId":10698,"journal":{"name":"Corporate Law: Law & Finance eJournal","volume":"25 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74283860","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：