Regulatory Effects on Voting Premiums in Sweden - Explaining the price differential between share classes during a period of legislative change

Sammanfattning: This paper explains the voting premium of dual-class firms in Sweden and specifically investigates the effects of a fair price rule, hindering differentiated takeover bids between superior voting shares (Class A) and inferior voting shares (Class B). While Sweden is the country with the highest fraction of dual-class firms in Europe, in recent years, no comprehensive study has been conducted explaining the voting premium. The dual-class structure, championed by the business community, has long been contested and was once again under scrutiny when the discussion of a fair price rule emerged. With daily trading data from 2004-2014, we explain up to 25.2% of the voting premium in Sweden, utilising control variables on ownership structure, liquidity and firm size. In order to assess the regulatory effect, we perform a difference-in-differences analysis, employing a control group consisting Western European dual-class firms. The results suggest the rule drove voting premiums down by 8.0 percentage points and thus had significant monetary implications for holders of Class A shares.