The Rise of Dual-Class Stock IPOs

Dhruv Aggarwal, Ofer Eldar, Yael Hochberg and Lubomir P. Litov

No 28609, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We create a novel dataset to examine the nature and determinants of dual-class IPOs. We document that dual-class firms have different types of controlling shareholders and wedges between voting and economic rights. We find that the founders' wedge is largest when founders have stronger bargaining power. The increase in founder wedge over time is due to increased willingness by venture capitalists to accommodate founder control and technological shocks that reduced firms' needs for external financing. Greater founder bargaining power is also associated with a lower likelihood of sunset provisions that eliminate dual-class structures within specified periods.

JEL-codes: G24 G28 G34 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-fmk
Note: CF PR
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Published as Dhruv Aggarwal & Ofer Eldar & Yael V. Hochberg & Lubomir P. Litov, 2022. "The rise of dual-class stock IPOs," Journal of Financial Economics, vol 144(1), pages 122-153.

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