ABSTRACT
Loyalty shares, mechanisms designed to encourage long-term share ownership through disproportional ownership rights, face questions regarding their benefits and costs. We examine these questions through a natural experiment – the passage of the Florange Act in France – which required firms to adopt loyalty shares unless shareholders opted out. We find differences in market reactions: negative for firms opting out, positive for those newly adopting the shares. Providing comparative evidence across these firms and across the two-thirds of French firms that previously issued loyalty shares, we show how the benefits and costs of loyalty shares vary across firms.
Belot, François and Ginglinger, Edith and Starks, Laura T, Encouraging Long-Term Shareholders the Effects of Loyalty Shares with Double Voting Rights.
First posted 2022-07-22 13:00:42
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