Impact of Restricted Voting Share Structure on Firm Value and Performance


Eberhardt School of Business, University of the Pacific, 3601 Pacific Avenue, Stockton, California, USA 95211. Tel: 1-209-946-3904; E-mail:


Manuscript Type: Empirical

Research Question/Issue: In this study, we examine whether firm value, operating performance, and stock performance of the Canadian firms which have issued restricted voting shares (RVS) is different from comparable non-RVS firms. We test two competing hypotheses – the controlling shareholder expropriation hypothesis and the investor protection and substitution hypothesis for the Canadian RVS firms.

Research Findings/Insights: Based on a ten-year panel data sample and extensive robustness tests, we do not find that the RVS firms have lower firm value, operating performance, or stock performance than the non-RVS firms in Canada. There is also no evidence of shareholder value expropriation in key financial decisions, such as mergers and acquisitions and dividend payments. The study does not support the controlling shareholder expropriation hypothesis in the Canadian RVS firms.

Theoretical/Academic Implications: The RVS structure has been criticized for lack of shareholder rights protection and risk of value entrenchment in the corporate governance literature. However, the existing empirical evidence is mainly based on the firms in the United States. Using a Canadian sample, we show that these results are a function of corporate governance and regulatory environment and the US results cannot be generalized. We find no evidence of shareholder value appropriation nor do we find differential value or performance implications. We believe that a blanket rejection of RVS structure may not be warranted.

Practitioner/Policy Implications: Our study concludes that the RVS structure in Canadian firms is influenced by the nature of these firms and the regulatory environment in Canada that protects minority shareholders from wealth appropriation. Our evidence suggests that policy makers and practitioners should evaluate RVS firms on their individual merit and in individual countries – no generalization is warranted.