OWNERSHIP OF DUAL CLASS SHARES AND PASSIVE INVESTMENT STRATEGIES

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Christopher J. Marquette, Thomas G. E. Williams

DOI:10.22495/cocv6i1c2p7

Abstract

Previous studies of firms with two classes of stock find a price premium for the class with superior voting rights over the restricted voting rights shares. This premium changes over time and is related to the likelihood of a contested takeover attempt. These findings have implications for both passive and active investors. We find that for passive, buy-and-hold investors, restricted voting shares dominate superior voting shares in mean-variance space. This relationship also holds for a four factor model specification of stock returns. Our evidence indicates that passive, buy-and-hold investors can achieve a higher return with restricted vote shares than superior vote shares with no increase in either stand-alone or portfolio risk

Keywords: Ownership, Dual Class Shares, Passive Investment Strategies

How to cite this paper: Marquette, C. J., & Williams, T. G. E.(2008). Ownership of dual class shares and passive investment strategies. Corporate Ownership & Control, 6(1-2), 301-311. http://doi.org/10.22495/cocv6i1c2p7