Management entrenchment and the valuation discount of dual class firms

Vishaal Baulkaran

The Quarterly Review of Economics and Finance, 2014, vol. 54, issue 1, 70-81

Abstract: Prior studies provide empirical evidence that dual class firms are discounted compared to single class firms due to the extraction of private benefits. This study examines the link between managerial entrenchment and the dual class discount. Using propensity score matching and conditioning for past underperformance, the paper shows that investors apply a greater discount to the value of dual class firms as the degree of managerial entrenchment increases. The impact of entrenchment on dual class discount is more pronounced when the CEO is the controlling shareholder compared to when the controlling shareholder is a director or the chairman of the board.

Keywords: Management entrenchment; Dual class discount; Concentrated ownership and control (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:54:y:2014:i:1:p:70-81

DOI: 10.1016/j.qref.2013.08.001

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