Nowadays, more and more investors seek short-term gains. This shows the average holding period of shares and the decreasing number of institutional long-term investors. This leads to an unstable balance of funds available for companies to undertake projects. However, investors have to be reimbursed for their loyalty. One way companies can attract investors is by issuing L-Shares (Loyalty Shares). Investors holding those shares for a predefined period of time (e.g. 2 years) receive a form of loyalty bonus (e.g. loyalty dividend).

For the empirical analysis, two hypothetical portfolios containing 10 shares each have been set up: a static and a dynamic. The static portfolio included shares of companies paying a loyalty dividend/yielded a high dividend in the past. The portfolio was held as a buy and hold portfolio, meaning no transactions during the investment period. The dynamic portfolio consisted of shares listed at the Paris stock exchange and were allocated at random. Every quarter the portfolios underperforming shares were replaced by others at random. Returns were compared over a period of six years.

The result of the empirical analysis showed, that the portfolio held static outperformed the dynamic clearly. This was mainly due to the performance of the shares paying a loyalty dividend where two out of three had a positive performance. Furthermore, stock splits led to a high capital gain. The dynamic portfolio suffered under the poor performance of financial stocks which were allocated at random often. In general had the index CAC 40 which has been used as a benchmark a negative performance over the six years under consideration. However, the additional income in form of the loyalty dividend is insignificant and probably not enough motivation for an investor to invest in the long-term. The Institute for Finance can benefit from the project as a basis for further research. One should perform a similar analysis with a focus over a longer investment horizon and wait for more companies to offer loyalty rewards to their shareholders and then to include them in the portfolio analysis.