Clas Bergström

OWNERSHIP OF EQUITY IN DUAL-CLASS FIRMS*

Abstract The paper investigates the hypothesis that large shareholders use shares with differential voting rights for the purpose of expropriating minority shareholders. Consistent with several theoretical arguments but inconsistent with the expropriation hypothesis, we find that large shareholders own much more equity than required for control. We also show how the law can construct a regulation which reduces the opportunity for expropriation and at the same time allows for the possible benefits of differential voting rights.

The determinants of corporate ownership: An empirical study on Swedish data

Abstract This paper provides empirical evidence about the determinants of corporate ownership structure. In Swedish listed corporations, ownership concentration decreases with firm size and increases with firm-specific risk. We also find that dual classes of shares create vote concentration but that the presence of differential voting rights have limited impact on equity concentration. Our results indicate that the ambition to control a firm is not motivated by a ‘pure demand for power’. Furthermore, the value of control does not derive from the possibility to expropriate the fringe of minority shareholders. The value of control has to be motivated by some other economic motives including ownership of equity.

Secured debt and the likelihood of reorganization

Theory suggests that secured creditors may increasingly oppose a debtors reorganization as the value of their collateral approaches the amount of their claims. If reorganization occurs and the val ...

Differentiated bids for voting and restricted voting shares in public tender offers

Abstract This paper develops a model for takeover bid premiums of voting and restricted voting shares when the bidder wants 100% of the target firm. For this special case, a higher bid premium may be offered either to the voting or to the restricted voting shareholders. We also analyze consequences of the equal offer and one share/one vote principles and investigate the models explanatory power on Swedish data.

Price differentials between different classes of stocks: an empirical study on Chinese stock markets

Abstract This paper investigates the effect of strict segmentation on pricing in the context of the Chinese stock markets. The paper demonstrates that information asymmetry between foreign investors and domestic investors, liquidity effects, diversification effects, clientele bias, risk-free return differentials between foreign and domestic investors, and foreign exchange risks are significant factors in explaining discounts on shares that can only be owned by foreign investors.

Embargo Threats and the Management of Emergency Reserves

This paper develops a model of a country that can import oil in normal times but is subject to random trade disruptions. To mitigate the effects of these disruptions, some of the imported oil is stockpiled. There are two kinds of uncertainty involved: the date at which an embargo will be imposed is not known in advance, and given that an embargo has been imposed, the date at which it will end is uncertain. Optimal behavior is analyzed by means of dynamic programming. 13 references.

Underpricing and Long-Run Performance Patterns of European Private-Equity-Backed and Non-Private-Equity-Backed IPOs

Fast forward now to the endgame, after the company is public. Starting first with the performance of shares on a public market; how will they perform? Bergström, Nilsson, and Wahlberg present the performance of a data-set of 152 private-equity-backed IPOs against 1,370 non-private equity-backed firms in London and Paris between 1994 and 2004. Have these firms been underpriced by their issuers? Do private-equity-backed IPOs outperform their non-private-equity-backed counterparts? And how do these two groups fare against indexed performance?

On the Design of Efficient Priority Rules for Secured Creditors: Empirical Evidence from A Change in Law

This article assesses the effect of a reduction in secured creditor priority on distributions and administrative costs in liquidating bankruptcy cases by reporting the first empirical study of the effect of a priority change. Priority reform had redistributive effects in liquidating bankruptcy. As expected, average payments to general unsecured creditors were significantly higher after the reform than before the reform and payments to secured creditors decreased. Reform did not increase the size of the pie to be distributed in bankruptcy. Nor did it increase the direct costs of bankruptcy.

Insolvency Risks and the Role of Insolvency Law

Insolvency law plays a prominent role in the area of commercial risk and risk management. All commercial contracts must be drafted against the background of insolvency law. And all lenders, at the time of evaluating and extending credit, must consider the bankruptcy implications of their loan decisions. The efficacy of a lender’s decisions is tested only when a borrower is in financial distress and bankruptcy is one of the likely outcomes. So study of insolvency laws and their operation must accompany studies of commercial risk and risk management.