Sticking around Too Long? Dynamics of the Benefits of Dual-Class Voting

63 Pages Posted: 21 Mar 2018 Last revised: 28 Jan 2019

See all articles by Hyunseob Kim

Hyunseob Kim

Cornell University - Samuel Curtis Johnson Graduate School of Management

Roni Michaely

University of Geneva - Geneva Finance Research Institute (GFRI)

Date Written: January 2, 2019

Abstract

Using a new dataset of corporate voting-rights from 1971 to 2015, we find that young dual-class firms trade at a premium and operate at least as efficiently as young single-class firms. As dual-class firms mature, their valuation declines, and they become less efficient in their margins, innovation, and labor productivity compared to their single-class counterparts. Voting premiums increase with firm age, suggesting that private benefits increase over maturity. Most sunset provisions that dual-class firms adopt are ineffective. Our findings suggest that effective, time-consistent sunset provisions would be based on age or on inferior shareholders’ periodic right to eliminate dual-class voting.

Keywords: Dual class shares; Voting rights; Sunset provisions; Firm maturity

JEL Classification: G14, G18, G30

Suggested Citation

Kim, Hyunseob and Michaely, Roni, Sticking around Too Long? Dynamics of the Benefits of Dual-Class Voting (January 2, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 590/2019. Available at SSRN: https://ssrn.com/abstract=3145209 or http://dx.doi.org/10.2139/ssrn.3145209

Hyunseob Kim (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Roni Michaely

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland

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