One Share–One Vote: Evidence from Europe

Johan Erik Eklund, Thomas Poulsen

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    Many European companies use some type of control-enhancing mechanism, such as dual class shares or a pyramid ownership structure. Such mechanisms cause deviations from the one share–one vote principle, allocating more voting rights than cash flow rights to some shares and, in turn, providing the owners of such shares with more influence than what would be warranted by their investment. However, disproportionate influence may also arise in firms without such mechanisms. In this article, we present a method for disentangling disproportionality, which allows us to more precisely test the effects of deviations from the one share–one vote principle. We argue that previous studies suffer from a measurement problem caused by the use of a simplistic notion of disproportionality, and then we show that the effect of control-enhancing mechanisms on firm value has been overestimated in previous studies.
    Original languageEnglish
    JournalApplied Financial Economics
    Volume24
    Issue number7
    Pages (from-to)453-464
    ISSN0960-3107
    DOIs
    Publication statusPublished - 4 Mar 2014

    Cite this

    Eklund, Johan Erik ; Poulsen, Thomas. / One Share–One Vote : Evidence from Europe. In: Applied Financial Economics. 2014 ; Vol. 24, No. 7. pp. 453-464.
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    abstract = "Many European companies use some type of control-enhancing mechanism, such as dual class shares or a pyramid ownership structure. Such mechanisms cause deviations from the one share–one vote principle, allocating more voting rights than cash flow rights to some shares and, in turn, providing the owners of such shares with more influence than what would be warranted by their investment. However, disproportionate influence may also arise in firms without such mechanisms. In this article, we present a method for disentangling disproportionality, which allows us to more precisely test the effects of deviations from the one share–one vote principle. We argue that previous studies suffer from a measurement problem caused by the use of a simplistic notion of disproportionality, and then we show that the effect of control-enhancing mechanisms on firm value has been overestimated in previous studies.",
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    One Share–One Vote : Evidence from Europe. / Eklund, Johan Erik; Poulsen, Thomas.

    In: Applied Financial Economics, Vol. 24, No. 7, 04.03.2014, p. 453-464.

    Research output: Contribution to journalJournal articleResearchpeer-review

    TY - JOUR

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    T2 - Evidence from Europe

    AU - Eklund, Johan Erik

    AU - Poulsen, Thomas

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    AB - Many European companies use some type of control-enhancing mechanism, such as dual class shares or a pyramid ownership structure. Such mechanisms cause deviations from the one share–one vote principle, allocating more voting rights than cash flow rights to some shares and, in turn, providing the owners of such shares with more influence than what would be warranted by their investment. However, disproportionate influence may also arise in firms without such mechanisms. In this article, we present a method for disentangling disproportionality, which allows us to more precisely test the effects of deviations from the one share–one vote principle. We argue that previous studies suffer from a measurement problem caused by the use of a simplistic notion of disproportionality, and then we show that the effect of control-enhancing mechanisms on firm value has been overestimated in previous studies.

    KW - Ownership Structure

    KW - Power Indexes

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