What's in a vote The short- and long-run impact of dual-class equity on IPO firm values

Scott B. Smart, Ramabhadran S. Thirumalai and Chad J. Zutter

Journal of Accounting and Economics, 2008, vol. 45, issue 1, pages 94-115

Abstract: We find that relative to fundamentals, dual-class firms trade at lower prices than do single-class firms, both at the IPO and for at least the subsequent 5 years. The lower prices attached to duals do not foreshadow abnormally low stock or accounting returns. Moreover, some types of CEO turnover are less frequent among duals, and in general CEO turnover is sensitive to firm performance for singles but not for duals. Finally, when duals unify their share classes, statistically and economically significant value gains occur. Collectively, our results suggest that the governance associated with dual-class equity influences the pricing of duals.

Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jaecon:v:45:y:2008:i:1:p:94-115

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