Introduction

The paper examines why European listed firms adopt the Societas Europaea (SE) legal structure and how this affects shareholder outcomes, governance and international activity. SEs represented more than 25% of EURO STOXX 50 market capitalisation by 2024. The study analyses 178 listed firms announcing SE adoption between 2003 and 2024 using matched-firm and difference-in-differences analysis.

The SE legal form: Institutional features and its prevalence over the past two decades

Introduced in 2004, the SE framework allows firms to operate under a supranational European legal structure while retaining national tax and insolvency obligations. Firms can relocate headquarters across EU jurisdictions, choose one-tier or two-tier boards, and negotiate employee representation arrangements.

Germany accounted for almost 65% of listed SEs and France nearly 20%. SE adoption was concentrated among large firms such as Allianz, SAP and LVMH. SEs were more common in countries requiring two-tier boards or employee board representation and in countries with stronger pro-European sentiment.

Firms changing their legal form to SE status

The most common reason for SE adoption was strengthening European or international identity, representing 61.7% of disclosed motives. Governance flexibility accounted for 11.2%, while 8.2% cited headquarters relocation.

Around 10% of firms relocated headquarters after conversion. Fifteen firms switched from two-tier to one-tier boards, mainly in Germany. Conversion averaged 262 days because of shareholder approvals and employee negotiations.

The characteristics of firms opting for the SE legal form

Compared with peers, SE adopters recorded stronger sales growth, higher abnormal stock performance and greater foreign asset exposure before conversion. Family-controlled firms represented 57% of adopters versus 44% of matched firms. Adopters also faced higher effective tax rates and higher R&D expenditure.

Regression analysis showed younger firms, family-controlled firms and firms with larger R&D spending were more likely to adopt SE status, suggesting motivations linked to international expansion, governance flexibility and succession planning.

Switching to the SE legal form and its consequences

Profitability, Tobin’s Q, capital expenditure, tax rates and payout ratios remained largely unchanged after conversion. However, stock performance and sales growth weakened relative to peers.

Information asymmetry increased after adoption, measured through higher Amihud illiquidity ratios. The paper argues that broader governance flexibility created uncertainty regarding future managerial and shareholder decisions.

Globalisation: Cross-border acquisitions and foreign investors

SE firms became more acquisitive after conversion, particularly through cross-border acquisitions outside the EU. Diversifying acquisitions also increased, indicating the SE framework strengthened firms’ international positioning beyond administrative simplification.

Foreign investor ownership also increased, especially among non-domestic European institutional investors, suggesting SE status reduced investor home bias and improved international appeal.

Market reaction to the change in legal form

Markets reacted negatively at shareholder approval and registration stages, with registration-period abnormal returns reaching -1.35% over seven days. Positive reactions occurred only when firms clearly announced headquarters relocations, generating around +5.6% abnormal returns.

Family-controlled firms experienced more negative reactions, reflecting investor concerns regarding minority shareholder protection and increased managerial discretion.

Conclusion

The paper concludes SE adoption improves international positioning, foreign investor participation and cross-border acquisition activity, but does not materially improve operating performance. Policymakers considering future EU corporate frameworks should reduce information asymmetry and strengthen investor protections to improve confidence in supranational legal structures.