Sticking around Too Long? Dynamics of the Benefits of Dual-Class Voting

Hyunseob Kim and Roni Michaely

No 19-09, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Using a new dataset of corporate voting-rights from 1971 to 2015, we find that young dual-class firms trade at a premium and operate at least as efficiently as young single-class firms. As dual-class firms mature, their valuation declines, and they become less efficient in their margins, innovation, and labor productivity compared to their single-class counterparts. Voting premiums increase with firm age, suggesting that private benefits increase over maturity. Most sunset provisions that dual-class firms adopt are ineffective. Our findings suggest that effective, time-consistent sunset provisions would be based on age or on inferior shareholders’ periodic right to eliminate dual-class voting.

Keywords: Dual class shares; Voting rights; Sunset provisions; Firm maturity (search for similar items in EconPapers)
JEL-codes: G14 G18 G30 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2019-03, Revised 2019-03
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1909

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