Value Creation and Value Destruction in the Societas Europaea: Evidence from the New Legal Form

I study company characteristics that are associated with shareholder value changes in the new legal form: Societas Europaea (SE). In an event study of 47 companies that announce to become SEs I find that companies that change their board structure from two-tier to one tier have 3.7 percentage points lower returns than companies that do not change their board structure. Companies in the gambling or renewable energy industry have 2.8 percentage points higher returns than other companies. Last, companies already underperform their industry peers before they become SEs. The results are consistent with the hypothesis that adoption of the SE can be used to weaken the board's monitoring rule. Moreover, the SE's possibility of relocation within the European Union is beneficial to companies that operate in industries that depend on state subsidies, such as the renewable energy industry, or need special permits to operate (the online gambling industry).