Work

Extreme Governance: An Analysis of Dual-Class Firms in the United States

Year: 2009

Type: article

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.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhp024

Authors: Paul A. Gompers, Joy Ishii, Andrew Metrick

Institutions: National Bureau of Economic Research, Harvard University, Stanford University, Yale University

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2163506883

FWCI: 61.9

Cites: 76

Cited by: 667

Related to: 9