Dual-Class Shares, Corporate Innovation, and the Life Cycle of Firms: International Evidence

43 Pages Posted: 23 Mar 2022

See all articles by Julian Atanassov

Julian Atanassov

University of Nebraska

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

Ji Woo Ryou

West Virginia University

Date Written: January 27, 2016

Abstract

Theoretically, dual-class ownership can promote innovation by increasing managerial flexibility and tolerance to failure. Yet, it can also inhibit it by promoting managerial entrenchment and misbehavior. Using hand-collected firm-level international data, we document an overall negative impact of dual-class structure and the voting premium on corporate innovation. Upon closer examination, however, we demonstrate that the relationship depends on the firms’ lifecycle – it is positive for younger and negative for older firms. The effects are mitigated by alternative governance mechanisms. We mitigate potential endogeneity by exploiting an exogenous shock due to the staggered introduction of corporate board reforms across countries.

Keywords: dual-class ownership structure, innovation, patents, corporate governance, ownership, shareholders, private benefits of control, voting premium

JEL Classification: D9, E7, G

Suggested Citation

Atanassov, Julian and Hong, Hyun A. and Kalcheva, Ivalina and Ryou, Ji Woo, Dual-Class Shares, Corporate Innovation, and the Life Cycle of Firms: International Evidence (January 27, 2016). Available at SSRN: https://ssrn.com/abstract=4019652 or http://dx.doi.org/10.2139/ssrn.4019652

Julian Atanassov (Contact Author)

University of Nebraska ( email )

CBA
University of Nebraska, Lincoln
Lincoln, NE 68588
United States

Hyun A. Hong

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

San Antonio, TX 78249
United States

Ji Woo Ryou

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

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