Abstract

http://ssrn.com/abstract=562511
 
 

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Extreme Governance: An Analysis of Dual-Class Companies in the United States


Paul A. Gompers


Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Joy L. Ishii


Stanford Graduate School of Business

Andrew Metrick


Yale School of Management; National Bureau of Economic Research (NBER)

May 1, 2008

AFA 2005 Philadelphia Meetings
Rodney L. White Center for Financial Research Working Paper No. 12-04
Rock Center for Corporate Governance Working Paper No. 39

Abstract:     
We construct and analyze a comprehensive list of dual-class firms in the United States and use this list to investigate the relationship between insider ownership and firm value. Our data has two useful features for this valuation analysis. First, since dual-class stock separates cash-flow rights from voting rights, we can separately identify the impact of each. Second, we address endogeneity concerns by using exogenous predictors of dual-class status as instruments. While other data sets have provided one of these features, our data set is the first to provide both. In single-stage regressions, we find strong evidence that firm value is increasing in insiders' cash-flow rights and decreasing in insider voting rights. In instrumental-variable regressions, the point estimates remain the same sign and magnitude, but the significance levels are lower.

Number of Pages in PDF File: 61

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Date posted: July 8, 2004 ; Last revised: September 29, 2009

Suggested Citation

Gompers, Paul A. and Ishii, Joy L. and Metrick, Andrew, Extreme Governance: An Analysis of Dual-Class Companies in the United States (May 1, 2008). AFA 2005 Philadelphia Meetings; Rodney L. White Center for Financial Research Working Paper No. 12-04; Rock Center for Corporate Governance Working Paper No. 39. Available at SSRN: http://ssrn.com/abstract=562511 or http://dx.doi.org/10.2139/ssrn.562511

Contact Information

Paul A. Gompers
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Joy L. Ishii
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

Andrew Metrick (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
(203)-432-3069 (Phone)
HOME PAGE: http://mba.yale.edu/faculty/profiles/metrick.shtml

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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