Dual-class share structures in Finnish practice: Why do Finnish publicly listed companies have dual-class share structures?

Abstract

OBJECTIVES OF THE STUDY:

In this thesis, I analyze why some listed companies in Finland have recently chosen to carry out their IPOs with dual-class share structures and why some companies have chosen to unify their share classes into a single class. I also analyze the presence of common characteristics amongst companies that have chosen to retain a dual-class share structure. Earlier research on dual-class share structures has concentrated mostly on the economic consequences of having such a structure. A few studies exist, however, in which the correlation between different company characteristics and the existence of dual-class share structures have been analyzed. In this paper, the findings from the existing body of research are utilized in framing assumptions for creating, retaining and discarding dual-class share structures. Most of the existing studies have been carried out with data gathered from the U.S. market. Dual-class share structures are relatively common in Finland, and there appears to be a gap in literature when it comes to understanding the reasons for why such structures exist in abundance in Finland.

METHODOLOGY AND DATA:

The research method is explanatory, aiming to understand whether a causal relationship exists between dual-class share structures and selected company characteristics using quantitative, statistical regression analysis. Additionally, qualitative analysis is used to support the analysis of reasons behind the creation and unification of dual-class share structures. The data consists of all publicly listed companies on Nasdaq Helsinki OMX, including companies traded on the alternative market, First North Helsinki. Furthermore, the data includes prospectuses, public announcements and corporate legal documents of selected companies.

FINDINGS OF THE STUDY:

Finnish companies that have recently chosen to carry out their IPOs with dual-class share structures have not given any justification for such a choice. The main reasons to unify share classes into a single class are clarification of ownership structure, increasing public interest towards the company's share and improving the liquidity of shares. Larger companies, companies with some other anti-takeover provisions in their Articles of Association and companies operating in the health care or consumer goods business tend to have dual-class share structures more often than other companies. Within technology companies, dual-class share structures are rare.