Multi-class Shares around the World: Role of Institutional Investors
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This study examines multi-class share structures around the world. We use a comprehensive sample of publicly listed firms in 45 countries over the period 2001–2016 and find that institutional investors exhibit strong aversion toward multi-class firms, penalizing them through a valuation discount. The presence of institutional investors correlates with a higher likelihood of share-class unification. These effects are stronger for local (particularly in the US) and actively managed investors. Overall, our research highlights the role of institutional investors in the current debate on banning multi-class stocks from global stock indices.
Abstract
This study examines multi-class share structures around the world. We use a comprehensive sample of publicly listed firms in 45 countries over the period 2001–2016 and find that institutional investors exhibit strong aversion toward multi-class firms, penalizing them through a valuation discount. The presence of institutional investors correlates with a higher likelihood of share-class unification. These effects are stronger for local (particularly in the US) and actively managed investors. Overall, our research highlights the role of institutional investors in the current debate on banning multi-class stocks from global stock indices.