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

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

Hyunseob Kim, Roni Michaely

Series number :

Serial Number: 
590/2019

Date posted :

January 28 2019

Last revised :

January 28 2019
SSRN Share

Keywords

  • Dual Class Shares • 
  • voting rights • 
  • sunset provisions • 
  • Firm maturity

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 dualclass 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, timeconsistent sunset provisions would be based on age or on inferior shareholders’ periodic right to eliminate dual-class voting.
 

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Authors

Real name:
Hyunseob Kim
Professor
Real name:
Roni Michaely
University of Geneva - Geneva Finance Research Institute (GFRI)