Dual Class Share Structure and Innovation

66 Pages Posted: 16 Jun 2018 Last revised: 10 Sep 2018

See all articles by Lindsay Baran

Lindsay Baran

Kent State University

Arno Forst

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American)

M. Tony Via

Kent State University

Date Written: September 4, 2018

Abstract

Utilizing a sample of dual and single class firms matched on pre-IPO innovation and drivers of dual class IPO initiation, we find a positive association between disproportionate insider control and patent output, quality, and creativity. This innovativeness mitigates the negative effect of disproportionate insider control on firm value and is robust to antitakeover protection. Managers of firms characterized by disproportionate insider control also take more personal innovative risk by filing their own patents. However, positive effects are concentrated only in financially constrained firms and boost innovativeness for only about five years following the firms’ IPO, supporting calls for sunset provisions.

Keywords: Innovation, Dual Class, Governance, Firm Value

JEL Classification: G32, G34, O31, O32

Suggested Citation

Baran, Lindsay and Forst, Arno and Via, Marc, Dual Class Share Structure and Innovation (September 4, 2018). Available at SSRN: https://ssrn.com/abstract=3183517 or http://dx.doi.org/10.2139/ssrn.3183517

Lindsay Baran

Kent State University ( email )

Kent, OH 44242
United States

Arno Forst

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) ( email )

1 W. University Blvd.
Brownsville, TX 78520
United States
(956) 882 5783 (Phone)

Marc Via (Contact Author)

Kent State University ( email )

Kent, OH 44242
United States

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