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

50 Pages Posted: 24 Aug 2005

See all articles by Scott Smart

Scott Smart

Indiana University - Kelley School of Business - Department of Finance

Ramabhadran S. Thirumalai

Indian School of Business

Chad J. Zutter

University of Pittsburgh

Date Written: 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.

Keywords: Initial public offerings, Dual class, Ownership structure, Governance, Firm value, Long-run performance, CEO turnover

JEL Classification: G12, G14, G30, G32, G34

Suggested Citation

Smart, Scott B. 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: https://ssrn.com/abstract=784722 or http://dx.doi.org/10.2139/ssrn.784722

Scott B. Smart

Indiana University - Kelley School of Business - Department 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 ( 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/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
416
Abstract Views
2,923
rank
84,494
PlumX Metrics