Topic: one-share-one-vote and dual-class Shares in the Laboratory

Speaker: Associate Professor  Te Bao

Time: May 26, 2022 14:30

Location: Tencent meeting number: 797 762 442

Abstract: We test the seminal Grossman and Hart (1988) model on the optimality of the one-share-one-vote share structure against the dual-class share structure in a laboratory experiment. Our result shows qualitative support to their theoretical prediction asserting that the more efficient contender of control (incumbent or raider) is more likely to win the takeover contest under one-share-one-vote than under dual-class shares. It is interesting to note that contenders generally submit tender-offer prices higher than their maximum willingness to pay predicted by theory in all our treatments. However, the price deviation from the fundamental value is smaller under one-share-one-vote than under dual-class shares. Overall, our results show supportive evidence for better allocation and information efficiency of one-share-one-vote and draw attention to some practical issues when the theory is applied to real market settings.

Introduction of the Speaker: Te Bao, Associate Professor of Nanyang Technological University, Singapore. His research includes experimental economics, behavioral finance and computational economics. More than 30 papers have been published in international journals such as Economic Journal, European Economic Review, Experimental Economics, Journal of Economic Behavior and Organization, and Chinese journals such as Economic Research Journal, The Journal of World Economy, Management World and Journal of Management Science in China. He is an Associate Editor of Singapore Economic Review and an external reviewer of several academic journals and research funds.