Extreme Governance: An Analysis of Dual-Class Firms in the United States
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- 2 May 2009
- journal article
- research article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 23 (3), 1051-1088
- https://doi.org/10.1093/rfs/hhp024
Abstract
We construct a comprehensive list of dual-class firms in the United States and use this list to analyze the relationship between insider ownership and firm value. Our data have two useful features. First, since dual-class stock separates cash-flow rights from voting rights, we can separately identify the impact of each. Second, we address endogeneity concerns by using exogenous predictors of dual-class status as instruments. In single-stage regressions, we find strong evidence that firm value is increasing in insiders’ cash-flow rights and decreasing in insider voting rights. In instrumental variable regressions, the point estimates are similar but the significance levels are lower.Keywords
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