Abstract
Tests are conducted to assess if abnormal returns or beta nonstationarity are associated with the announcements and effective dates for a sample of Canadian firms. These firms created a new class of common stock by distributing restricted voting ( RV ) shares through the stock split (pro rata) distribution method to current shareholders (holders of single class [ SC ] shares which became voting [ V ] shares). The GLS and SUR estimation techniques and various adjustments are used to deal with possible violations of the assumptions of a dummy-variable version of a two-beta market model for portfolios of V and RV shares, V minus RV shares, V shares only, and RV shares only. Although no statistically significant abnormal returns or beta shifts are found on the announcement and effective dates for such recapitalizations, statistically significant positive abnormal returns are found on the effective dates for the paired differences between V and RV shares. These results differ from those found in Jog and Riding (1986, 1989) for the effective dates.
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