Market Reactions to Dual-class Share Creation and Unification: Evidence from Canada

This study examines the short-term market reactions to the creation of dual-class shares and the unification of dual-class shares in Canada from 1980 to2022. Specifically, we analyze abnormal returns, trading volume, liquidity, and institutional ownership changes surrounding these two events. We use the event study methodology to conduct abnormal return analysis on three event days: The Announcement Day (AD), the Approval Day (ApD), and the Effective Day (ED). For our creation sample, we observe the market reaction on all three days and abnormal returns of more than 5% associated with the Announcement Day. For our unification sample, we find a significant abnormal gain of nearly 4% on the Announcement Day. We also observe that trading volume activity increases significantly around both the creation and unification of dual-class shares. Consistent with previous literature, we find that stocks that adopt the dual-class share structure experience a significant decline in liquidity. Cross-sectional regression analysis suggests that positive abnormal returns of dual-class share creation can be explained by the firm’s arrangement of financing or prospect of financing, whereas positive abnormal returns of unification are associated with changes in institutional ownership. Overall, our analyses suggest strong market reactions and changes in important aspects, such as liquidity of firms, to both events.

Name thesis:degree_name

M.Sc. Management

Level thesis:degree_level

Masters

Discipline thesis:degree_discipline

Faculty of Business

Department dc:contributor.department

Faculty of Business Programs

Grantor

Brock University

Year dc:date.issued

2024

Author dc:creator

• Rabbi, Md Ata-e

• Dual-class Shares, Event Studies, Corporate Finance

Statement dc:rights

• CC0 1.0 Universal

Licence dc:rights.uri

• http://creativecommons.org/publicdomain/zero/1.0/

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/10464/18382

OAI identifier oai:identifier

oai:brocku.scholaris.ca:10464/18382