The Impact of Family Ownership and Dual Class Shares on Takeover Risk
University of Gothenburg - Department of Economics; University of Gothenburg - Centre for Finance; Hanken School of Economics
SSEES, University College London
February 21, 2005
Some studies have provided evidence that dual class shares reduce firm market value. Other studies have shown that dual class shares are more common in countries where the proxies for private benefits of control are low. In this paper we explore whether the negative relation between firm market value and dual class shares can be explained by lower takeover probability. For family controlled firms, we find that both the hazard rate of takeover and firm market value decline with dual class shares and firm leverage. We conclude that families entrench themselves by using dual class shares and by manipulating firm capital structure and this translates into lower firm value.
Number of Pages in PDF File: 30
Keywords: Takeovers, Ownership Structure, Dual Class Shares, Capital Structure, Family Firms, Hazard Functions
JEL Classification: G32, G34working papers series
Date posted: February 21, 2005
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