The Dynamic Trade-Off of Dual-Class Shares

Hyunseob Kim, Doron Levit and Roni Michaely

Papers from arXiv.org

Abstract: Dual-class shares allocate control to founders whose firm-specific investments drive firm value but separate control from ownership, raising agency costs. We analyze this trade-off dynamically. Using new data on US dual-class firms spanning 52 years and difference-in-differences designs, we show that valuations rise following dual-class recapitalizations but decline over time, whereas innovative output increases persistently. These effects are concentrated in industries with greater firm-specific investments. We find corresponding results for stock unifications. Investment by mature dual-class firms is less sensitive to opportunities and voting premia increase with maturity. Our results support dynamic treatment effects and yield new policy implications.

Date: 2026-08, Revised 2026-08
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