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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Cited by:

    1. Baran, Lindsay & Forst, Arno, 2015. "Disproportionate insider control and board of director characteristics," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 62-80.

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