Dual-Class Shares: A Review

The majority of firms traded in the World's three largest stock exchanges (London, New York, and Tokyo) follow the one share/one vote principle. However, in other countries, dual classes of shares are common place. For example, 50 percent of the publicly-traded Dutch firms have non-voting equity, and approximately 75 percent of the publicly-traded Danish, Finnish, and Swedish firms have shares that differ in their voting rights. This paper reviews the arguments as to why firms create dual classes of shares, their effect on firm value, and the relative prices of shares that differ only in their voting rights.