This paper examines the relative share pricing of 98 firms with two classes of common stock trading in the United States from 1984 to 1999. The firms feature common stock classes with differential voting rights and, in some cases, differential rights to dividends. The observed voting premiums are higher than those reported in previous studies of U.S. firms and are dependent on the form of dividend promise to the low-vote shareholder. The voting premium is higher in the presence of a control threat, when insiders do not hold controlling voting power, and during periods of poor firm performance.

We investigate the determinants and consequences of the mutual holding company (MHC) structure that allows mutual thrifts to issue stock to outside shareholders while maintaining the mutual form. Capital constrained firms with greater profit opportunities are more likely to choose a full demutualization; demonstrating that the MHC choice can be used to control for over- and under-investment costs. During periods of greater regulatory constraints, MHC firms have lower offer-day returns than full demutualizations. MHC firms are also less likely to be acquired, as the MHC structure provides protection from the market for corporate control. Demonstrating a clear preference by minority shareholders for the elimination of the MHC structure, the announcement of a second-stage conversion generates a 12% return.

The mutual holding company (MHC) structure establishes a dual-class stock that creates a unique opportunity to transfer wealth from thrift depositor–owners to new minority shareholders through the disparate payment of dividends. We show that MHCs are priced higher than comparable non-MHCs and dividend policy is a significant component of this valuation. We also show that MHC thrifts pay significantly higher dividends than non-MHC thrifts and that an Office of Thrift Supervision (OTS) ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends. These results have policy implications of special significance given that the OTS reversed its position in 2000 and because of the current controversy over the use of the MHC structure in the financial service industry.