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The Review of Corporate Finance Studies Vol. 13 No. 2 2024

The Life Cycle of Dual-Class Firm Valuation

Martijn Cremers1; Beni Lauterbach2; Anete Pajuste3

1 Mendoza College of Business, University of Notre Dame , USA and ECGI · 2 School of Business Administration, Bar-Ilan University , Israel and ECGI · 3 Stockholm School of Economics in Riga , Latvia and ECGI

Abstract

We examine U.S. dual- and single-class firms from 1980 to 2019 and document their valuation differences over their corporate life cycle. At the IPO, dual-class firms have higher mean valuations than do single-class firms, and some evidence indicates that this premium may emanate from dual-class firm founders’ unique vision and leadership skills. As firms age, the valuation premium of dual-class firms tends to dissipate, possibly because dual-class agency problems increase due to a gradual widening of the wedge (the difference between insider voting and cash flow rights) in the post-IPO years.

DOI
10.1093/rcfs/cfac026
Volume
13
Issue
2
Pages
459-493
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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