Dual-class Shares and Innovation: Evidence from the Swedish Market

Abstract: Dual-class share structures have long been a controversial topic due to their separation between voting and cash flow rights. This thesis examines the relationship between dual-class share structures and innovation in Sweden. The analysis is based on a sample of 2,441 firm-year observations of firms listed on Nasdaq Stockholm and First North Growth Market during the period 2009-2019. We measure innovation using the number of patents, R&D efficiency, and R&D intensity. Contrary to our hypotheses we find that dual-class shares have no significant association with any of the examined innovation measures. We further investigate subsamples of high-tech vs low-tech firms, young vs old firms, and firms that operate in industries with high- vs low industry concentration. We notice a possibly positive association between dual-class shares and the number of patents in high-concentration industries. The findings of this paper are relevant to further shed light on the implications of unequal voting rights in Sweden.