Journal of Financial Economics Vol. 69 No. 1 2003
Control as a motivation for underpricing: a comparison of dual and single-class IPOs
Abstract
We find that dual-class firms experience less underpricing than single-class firms and explore several hypotheses which explain this phenomenon. Compared to single-class firms, dual-class companies have slightly higher post-IPO institutional ownership and experience fewer control events. Although dual-class firms achieve a lower underpricing cost, they trade at lower prices relative to earnings and sales than single-class IPOs. This pricing differential, combined with evidence that dual-class managers earn higher compensation and that dual-class shares are common among media and entertainment industry IPOs, suggests that dual-class ownership structures protect private control benefits.
- DOI
- 10.1016/s0304-405x(03)00109-0
- Volume
- 69
- Issue
- 1
- Pages
- 85-110
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref