A two-list corporate structure is in fact a merger between two companies, in which they agree to combine their activities and cash flows and pay similar dividends to the shareholders of both companies, while retaining separate shareholder records and identities. In almost all cases, the two companies are listed in different countries. A fourth reason is that DLCs do not necessarily need a regulatory (antitrust) agreement and should not be limited by the requirement to authorize foreign investment. Finally, access to local capital markets may be restricted if an offer disappears in a regular merger. This is based on the idea that local investors already know the company before the DLC. However, the structure of the DLC also has drawbacks. The structure can undermine investor transparency and reduce executive efficiency. In addition, the issuance of shares in connection with mergers and capital market transactions (buckets. B, share repurchases and share splits) under the DLC structure is more complex. A third reason is the reduction in investor return, which would lower the share price of one of the companies in their own market if the merger route was instead used. In other words, some institutional investors are not able to hold shares in companies established outside their country of origin or may hold those shares in limited quantities. In addition, the non-surviving entity would be removed from all indices in the event of a merger. The index tracking funds should then sell the shares of the surviving company.

With the DLC structure, all this would be avoided. The shares of DLC`s parent companies represent rights to exactly the same underlying cash flows. In integrated and efficient financial markets, the share prices of IBLE`s parent company should therefore move towards lockstep. However, in practice, there may be large differences from theoretical price parity. In the early 1980s, for example, Royal Dutch NV was traded at a discount of about 30% compared to Shell Transport and Trading PLC. In the academic financial literature, Rosenthal and Young (1990) [6] and Froot and Dabora (1999)[7] show that three DLCs (Royal Dutch Shell, Unilever and Smithkline Beecham) were made in considerable errors over a long period of time. Both studies conclude that fundamental factors (such as currency risk, governance structures, legal contracts, liquidity and taxation) are not sufficient to explain the magnitude of price differentials. Froot and Dabora (1999) [7] show that the relative prices of the twin shares correlate with the stock market indices of the markets on which each of the twins has its main listing.

For example, when the FTSE 100 rises against the AEX index (the Dutch stock index), the share price of Reed International PLC generally rises relative to elsevier NV`s share price. De Jong, Rosenthal and van Dijk (2008) [8] report similar effects for nine other DLCs. One possible explanation is that the mood of the local market affects the relative prices of the shares of DLC`s parent companies.