The rise of dual-class stock IPOs

Dhruv Aggarwal, Ofer Eldar, Yael V. Hochberg and Lubomir P. Litov

Journal of Financial Economics, 2022, vol. 144, issue 1, 122-153

Abstract: We create a novel dataset to examine the recent rise in dual-class IPOs. We document that dual-class firms have different types of controlling shareholders and wedges between voting and economic rights, and that the increasing popularity of dual-class structures is driven by founder-controlled firms. We find that founders’ wedge is greater when founders have stronger bargaining power. The increase in founder control over time is due to greater availability of private capital and technological shocks that reduced firms’ needs for external financing. Stronger bargaining power is also associated with a lower likelihood of sunset provisions that terminate dual-class structures.

Keywords: Dual-class; Initial public offerings (IPOs); Entrepreneurship; Corporate governance; Venture capital; Private firms (search for similar items in EconPapers)
JEL-codes: G24 G28 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:1:p:122-153

DOI: 10.1016/j.jfineco.2021.12.012

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