On the Decision to Go Public with Dual Class Stock

42 Pages Posted: 18 May 2009 Last revised: 13 Aug 2009

See all articles by Onur Arugaslan

Onur Arugaslan

Western Michigan University - Haworth College of Business

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration

Robert L. Kieschnick

University of Texas at Dallas

Date Written: May 4, 2009

Abstract

Why do firms deviate from a one share-one vote regime when going public? We consider three arguments for this choice. Examining data on U.S. IPOs from 1980 through 2008, we do not find that firms that go public with dual class stock so managers have more incentive to invest in hard to monitor projects or to gain more when selling control of the firm. Rather managers appear to take their firms public with dual class stock so that they can retain control of their firm while reducing their wealth exposure to firm-specific risk by more than would be possible if they went public with a single class stock.

Keywords: IPO, dual class stock, one share-one vote

JEL Classification: G32

Suggested Citation

Arugaslan, Onur and Cook, Douglas O. and Kieschnick, Robert L., On the Decision to Go Public with Dual Class Stock (May 4, 2009). Available at SSRN: https://ssrn.com/abstract=1402756 or http://dx.doi.org/10.2139/ssrn.1402756

Onur Arugaslan

Western Michigan University - Haworth College of Business ( email )

Department of Finance and Commercial Law
Kalamazoo, MI 49008
United States
269-387-5981 (Phone)
269-387-5839 (Fax)

HOME PAGE: http://www.hcob.wmich.edu/directory/fcl/fcl.htm#

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8971 (Phone)
205-348-0590 (Fax)

Robert L. Kieschnick (Contact Author)

University of Texas at Dallas ( email )

800 W. Campbell Rd, SM31
Richardson, TX 75080
United States
972-883-6273 (Phone)

HOME PAGE: http://www.utdallas.edu/~rkiesch/

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