Abstract

http://ssrn.com/abstract=784722
 
 

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What's in a Vote? The Short- and Long-Run Impact of Dual-Class Equity on IPO Firm Values


Scott Smart


Indiana University Dept. of Finance

Ramabhadran S. Thirumalai


Indian School of Business

Chad J. Zutter


University of Pittsburgh - Finance Group

August 14, 2006


Abstract:     
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, G34

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Date posted: August 24, 2005  

Suggested Citation

Smart, Scott and Thirumalai, Ramabhadran S. and Zutter, Chad J., What's in a Vote? The Short- and Long-Run Impact of Dual-Class Equity on IPO Firm Values (August 14, 2006). Available at SSRN: http://ssrn.com/abstract=784722 or http://dx.doi.org/10.2139/ssrn.784722

Contact Information

Scott B. Smart
Indiana University Dept. of Finance ( email )
1309 E. 10th St.
Kelley School of Business
Bloomington, IN 47405
United States
812-855-3401 (Phone)
812-855-5875 (Fax)
Ramabhadran S. Thirumalai
Indian School of Business ( email )
Gachibowli
Hyderabad, Andhra Pradesh 500 032
India
+91 (40) 2318 7151 (Phone)
+91 (40) 2300 7017 (Fax)

Chad J. Zutter (Contact Author)
University of Pittsburgh - Finance Group ( email )
352 Mervis Hall, Katz GSOB
University of Pittsburgh
Pittsburgh, PA 15260
United States
412-648-2159 (Phone)
412-648-1693 (Fax)
HOME PAGE: http://www.pitt.edu/~czutter/
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References:  46
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