Dual-class share structure in the context of M&As: An empirical analysis of deals from Swedish public acquirers during 2001-2015

Abstract: In a sample of 665 firm-year observations of 206 Swedish public acquirers listed on NASDAQ Stockholm or NGM during the period 2001-2015, the thesis discusses the prevalence of dual-class structure and evaluates its effects on M&A decisions and performance. During the observation period, the percentage of dual-class companies has slightly declined from 57.7% in 2001 to 51.0% in 2015. Dual-class structures are particularly common in industries with family ownership such as Industrials and Technology. In terms of deal characteristics, the probability of including cash in the deal consideration significantly increases in the divergence between cash flow and voting rights as measured by the wedge. Accordingly, dual-class shareholders are more averse to corporate decisions that potentially dilute their votes, such as including shares in the consideration for M&A deals. Against expectations, we find a negative relationship between dual-class structure and transaction value and an insignificant effect of dual-class structure on M&A performance measured by cumulative abnormal announcement returns (CAR). Conclusively, we do not find evidence that shareholders in dual-class companies consume private benefits through M&A deals.