What’s in a vote? The short- and long-run impact of dual-class
equity on IPO firm values

Zutter, Chad J; Thirumalai, Rhamabhadran; Smart, Scott B

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What’s in a vote? The short- and long-run impact of dual-class equity on IPO firm values

Smart, Scott B; Thirumalai, Rhamabhadran; Zutter, Chad J

Cite this item: Smart, S. B., Thirumalai, R., & Zutter, C. J. (2007, March 9). What’s in a vote? The short- and long-run impact of dual-class equity on IPO firm values. University of Otago Department of Finance Seminar Series. Presented at the University of Otago, Finance department, Seminar.

Permanent link to OUR Archive version: http://hdl.handle.net/10523/1520

Date: 2007-03-09

Pages: 50

Conference: University of Otago, Finance department, Seminar, Commerce 5.37, University of Otago, Dunedin, Otago

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

Research Type: Conference or Workshop Item (Seminar, Speech or Other Presentation)

Abstract:

We find that relative to fundamentals, dual-class firms trade at lower prices than do singleclass 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.

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