Loyalty Shares with Tenure Voting: Does the Default Rule Matter? Evidence from the Loi Florange Experiment

The contractual theory of the firm predicts that companies adopt charters that maximize firms’ value regardless of the default rule. We test this proposition around an exogenous switch of the default from a one-share-one-vote regime to tenure voting following a legal reform in France. In initial public offerings (IPOs), tenure voting is primarily adopted by families, and after the reform its use increased slightly but not significantly. The change in default rule has no significant impact on companies’ characteristics or valuations. For companies that were already listed with one-share-one-vote systems and would have been forced to switch to tenure voting by default, we observe a revealed preference for the choice they had made at the IPO; one-share-one-vote companies preserve their prereform status, unless the French state has a blocking minority. Overall, the results suggest that once firms have optimized, changing the default rule imposes transaction costs without changing outcomes.