The relevance of tag along rights and identity of controlling shareholders for the price spreads between dual-class shares: the brazilian case

This paper analyzes the determinants of the differential pricing of equity classes (the so-called dual-class premium [DCP]) in Brazil from 1995 to 2006 with a focus on two specific corporate governance aspects: i) the granting of tag along rights, a mandatory bid rule that extends to minority shareholders the right to sell their shares in case of a control transfer; and ii) the identity of the controlling shareholders, with an emphasis on family control. We examined 87 Brazilian listed firms throughout the period, resulting in a sample of 3,287 observations. We found empirical evidence that ch...