Dual-class versus single-class firms: information asymmetry

Lucy Lim ()
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Lucy Lim: Howard University

Review of Quantitative Finance and Accounting, 2016, vol. 46, issue 4, No 3, 763-791

Abstract: Abstract I examine information asymmetry in dual-class firms in general and when they need (do not need) additional external capital. In general the results show that dual-class firms have higher information asymmetry than single-class firms. When dual-class firms need additional external financing, the gap in information asymmetry between dual-class firms and single class firms is narrower. I find that as the need of additional external capital increases, the difference in information asymmetry between dual-class and single-class firms decreases (consistent with increased disclosures). It decreases, up to a point that there is no difference in information asymmetry with single-class firms that also needs additional external capital. When using adverse selection component of bid-ask spread, the paper finds that as the need of external financing gets high, dual-class firms show lower information asymmetry 1 year before they need additional external capital.

Keywords: Bid-ask spreads; Forecast error; Forecast dispersion; Dual-class firms; Information asymmetry; External capital (search for similar items in EconPapers)
JEL-codes: C36 M41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-014-0485-x

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