Time-Variation of Dual-Class Premia

Abstract

Dual class shares have been in existence in financial markets for more than one hundred years. One class of shares provides superior voting power, while the other class provides preferential access to economic benefits. Extant literature suggests that superior voting class shares should trade at premium over the economic shares. We revisit the dual-class share phenomenon and document the time-variation characteristics of the dual-class premium. We connect the premium to voting rights, liquidity and disproportional dividend privileges. We also document relationship between the dual-class premium and legal and institutional structures.

Keywords: dual-class shares, voting rights, liquidity risk, dividend privileges

JEL Classification: G32, G34