Multi-Class Shares Around the World: The Role of Institutional Investors

Jinhee Kim       Pedro Matos*        Ting Xu

November 2018

Abstract

This paper examines multi-class share structures around the world. Using a comprehensive sample of publicly listed firms in 45 countries over the period 2001–2016, we find that institutional investors exhibit strong aversion towards multi-class firms, investing less in these firms and 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 U.S.) and actively managed investors. Overall, our paper highlights the role of institutional investors in the current debate regarding banning multi-class stocks from global stock indices.