How to Dominate a Firm With Valuable Control? Dual Class Firms Around the World: Regulation, Security-Voting Structure, and Ownership Patterns

Abstract

Dual-class shares have presented a challenge to standard valuation theories, and yet they make up a significant share of the trading volume and market capitalization in a significant number of the world's largest stock exchanges. This descriptive study overviews the incidence of dual-class firms in the 46 largest national stock markets, and described their voting and cash-flow rights in detail. The security-voting structure (deviations from one share one vote) of dual-class firms is examined in a comparative cross-country perspective - the higher-voting class is noted to concentrate majority or super majority control virtually in all cases. The national regulatory environment for multiple share classes is a hotly-debated topic, on which the study sheds systematic light. Predictably, the ownership of dual class firms is significantly more concentrated than that of their single-class counterparts, and in most cases involves majority voting power and the absence of smaller sizable voting blocks. The bulk of the evidence is consistent with the hypothesis that dominant owners do not prefer to share control. Owners are mostly families, who also participate actively in the management and supervision of the firm.