Are liquidity and corporate control priced by shareholders? Empirical evidence from Swiss dual class shares

Stadard asset pricing models generally exclude corporate control and liquidity considerations as joint explanatory factors of the stock price formation process. This empirical study investigates their influence on Swiss Bearer and Registered share prices issued by the same firm. It is shown that the...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 1997, Vol.3 (4), p.299-323
Main Authors: Gardiol, Lucien, Gibson-Asner, Rajna, Tuchschmid, Nils S.
Format: Article
Language:English
Subjects:
Corporate control
Dual class shares
Liquidity
Market segmentation
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Summary:Stadard asset pricing models generally exclude corporate control and liquidity considerations as joint explanatory factors of the stock price formation process. This empirical study investigates their influence on Swiss Bearer and Registered share prices issued by the same firm. It is shown that the statistical properties of both shares' returns differ without implying profitable arbitrage opportunities. A multifactor model of the ‘premium’ between Bearer and Registered stock prices is then proposed and tested. The results show that the freely negotiable equity book value, the existence of dominant shareholder positions and ownership transfer regime changes are significant variables in explaining the dual class share price differential.
ISSN:0929-1199
1872-6313
DOI:10.1016/S0929-1199(97)00002-3