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The Life Cycle of Dual-Class Firm Valuation

Author

Listed:
  • Martijn Cremers
  • Beni Lauterbach
  • Anete Pajuste

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. (JEL G32, G34)

Suggested Citation

  • Martijn Cremers & Beni Lauterbach & Anete Pajuste, 2024. "The Life Cycle of Dual-Class Firm Valuation," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 13(2), pages 459-493.
    • Handle: RePEc:oup:rcorpf:v:13:y:2024:i:2:p:459-493.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfac026
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    Cited by:

    1. Alexander A. Muravyev & Nikolay S. Telyatnikov, 2024. "Dual Class Stock Companies: Global Experience and Russian Practice," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(3), pages 801-832.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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