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Management entrenchment and the valuation discount of dual class firms

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  • Baulkaran, Vishaal

Abstract

Prior studies provide empirical evidence that dual class firms are discounted compared to single class firms due to the extraction of private benefits. This study examines the link between managerial entrenchment and the dual class discount. Using propensity score matching and conditioning for past underperformance, the paper shows that investors apply a greater discount to the value of dual class firms as the degree of managerial entrenchment increases. The impact of entrenchment on dual class discount is more pronounced when the CEO is the controlling shareholder compared to when the controlling shareholder is a director or the chairman of the board.

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  • Baulkaran, Vishaal, 2014. "Management entrenchment and the valuation discount of dual class firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 70-81.
    • Handle: RePEc:eee:quaeco:v:54:y:2014:i:1:p:70-81
    DOI: 10.1016/j.qref.2013.08.001
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    3. Lei Gao & Andrey Zagorchev, 2020. "Dual-Class Firms and Innovation after NAFTA," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-33, March.
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    5. Abdullah & Jia’nan Zhou & Muhammad Hashim Shah, 2017. "Effect of Disproportional Voting Rights on Firm’s Market Performance: Evidence from Chinese Firms Cross-Listed on U.S. Exchanges," IJFS, MDPI, vol. 5(3), pages 1-11, September.
    6. Caixe, Daniel Ferreira & Kalatzis, Aquiles Elie Guimarães & Castro, Luiz Ricardo Kabbach de, 2019. "Controlling shareholders and investment-risk sensitivity in an emerging economy," Emerging Markets Review, Elsevier, vol. 39(C), pages 133-153.

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