What's in a Vote? The Short- and Long-Run Impact of Dual-Class Equity on IPO Firm Values
Indiana University Dept. of Finance
Ramabhadran S. Thirumalai
Indian School of Business
Chad J. Zutter
University of Pittsburgh - Finance Group
August 14, 2006
We find that relative to fundamentals, dual-class firms trade at lower prices than do single-class firms both at the IPO date and for at least the subsequent five years. The lower prices attached to dual-class firms do not foreshadow abnormally low stock or accounting returns. However, CEO turnover events do occur less frequently among dual-class firms and the circumstances surrounding CEO turnover vary between single- and dual-class companies. When dual-class firms unify their share classes statistically and economically significant value gains occur. Collectively, our results suggest that the governance associated with dual-class equity influences the pricing of dual-class firms.
Number of Pages in PDF File: 50
Keywords: Initial public offerings, Dual class, Ownership structure, Governance, Firm value, Long-run performance, CEO turnover
JEL Classification: G12, G14, G30, G32, G34working papers series
Date posted: August 24, 2005
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