Loyalty Shares with Tenure Voting - a Coasian bargain? Evidence from the Loi Florange Experiment

Loyalty Shares with Tenure Voting - a Coasian bargain? Evidence from the Loi Florange Experiment

Marco Becht, Yuliya Kamisarenka, Anete Pajuste

Series number :

Serial Number: 
398/2018

Date posted :

April 16 2018

Last revised :

April 16 2018
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Keywords

  • loyalty shares • 
  • tenure voting • 
  • time-phased voting • 
  • dual-class shares • 
  • oneshareone-vote • 
  • Coase theorem

French listed companies can issue shares that confer two votes per share after a holding period of at least two years (loyalty shares with tenure voting rights). In 2014 the default rule changed from one-share-one-vote to loyalty shares. The Coase theorem predicts that ceteris paribus shareholders rewrite the corporate charter to preserve the pre-reform structure.

The theorem also predicts that the proportion of loyalty shares in initial public offerings is unchanged. The paper shows that most one-share-one-vote companies reverted to the pre-reform contract. The exception were firms with a stake held by the French state. In initial public offerings, the new default rule had an impact; the proportion of loyalty share statutes increased from about forty to fifty percent after the passage of the law. Companies that kept the same statutes have a significantly higher market to book ratio than companies forced into a different regime. The evidence is broadly consistent with the predictions of the Coase theorem, but only in the absence of conflicted parties with veto power.

Authors

Real name: 
Fellow, Research Member, Institutional Member, Board Member
Solvay Brussels School for Economics and Management, Université libre de Bruxelles