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Wealth Transfers in Dual Class Recapitalisations with the Rights Method: the Case of the Italian Stock Market

Author

Listed:
  • Francesco Brioschi

    (Politecnico di Milano)

  • Stefano Paleari

    (University of Bergamo)

Abstract

Firms which exhibit a dual or multiple class of shares structure are listed in the stock markets of numerous countries. Shares with superior voting rights usually sell at a premium. If a firm with at least two categories of outstanding shares issues new shares with the rights method, a wealth transfer among the various categories of shareholders may arise. This paper presents a model which describes the wealth transfer mechanism as well as some empirical evidence drawn from the Italian stock market. In some cases the recapitalisation operations favour non voting shareholders who are not in control. Some considerations which try to explain why such occurrence may arise are also advanced.

Suggested Citation

  • Francesco Brioschi & Stefano Paleari, 1998. "Wealth Transfers in Dual Class Recapitalisations with the Rights Method: the Case of the Italian Stock Market," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 57(2), pages 157-188, September.
    • Handle: RePEc:gde:journl:gde_v57_n2_p157-188
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    More about this item

    Keywords

    dual class recapitalisation; rights issue; wealth transfer; ownerhip structure;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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