 Dual-class share structure and firm risksSoohyung Kim Pacific-Basin Finance Journal, 2023, vol. 80, issue C Abstract: While costs associated with dual-class share ownership structures are widely documented, the benefits are seldom studied in the literature. We present evidence that a dual-class share structure promotes corporate risk-taking by providing insulation to insiders, such as management and controlling shareholders, from short-term market pressure. We then show that dual-class shares increase the market valuation of firms with high corporate risks, in contrast to the finding in the literature that a dual-class share structure is associated with lower valuation and performance. To provide a possible channel through which dual-class firms can increase corporate risk-taking, we find that dual-class firms are more likely to engage in mergers and acquisitions (M&As), especially non-diversifying M&As. We address endogeneity concerns by using a sample of share unifications and show that when dual-class firms change to single-class status, their corporate risks decrease. Keywords: Dual-class shares; Business segments; Cash flow volatility; Earnings volatility; Investment opportunities; Mergers and acquisitions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001506 DOI: 10.1016/j.pacfin.2023.102084 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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