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The Board of Directors and Dual-Class Recapitalizations

Author

Listed:
  • Curtis J. Bacon
  • Marcia Millon Cornett
  • Wallace N. Davidson
  • III

Abstract

There are two conflicting hypotheses regarding the effect of dual-class recapitalizations. One holds that the shareholders with voting rights improve the position of all shareholders because of their ability to negotiate a better takeover price. The other contends that the recapitalization can be used by management to entrench themselves in a takeover situation. This study examines the characteristics of the firms that choose dual-class recapitalizations and shows that both types of behavior are evident and that the composition of the board explains which type of behavior a firm is likely to exhibit.

Suggested Citation

  • Curtis J. Bacon & Marcia Millon Cornett & Wallace N. Davidson & III, 1997. "The Board of Directors and Dual-Class Recapitalizations," Financial Management, Financial Management Association, vol. 26(3), Fall.
    • Handle: RePEc:fma:fmanag:bacon97
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    Cited by:

    1. Laura Baselga-Pascual & Antonio Trujillo-Ponce & Emilia Vähämaa & Sami Vähämaa, 2018. "Ethical Reputation of Financial Institutions: Do Board Characteristics Matter?," Journal of Business Ethics, Springer, vol. 148(3), pages 489-510, March.
    2. Kai Li & Hernán Ortiz‐Molina & Xinlei Zhao, 2008. "Do Voting Rights Affect Institutional Investment Decisions? Evidence from Dual‐Class Firms," Financial Management, Financial Management Association International, vol. 37(4), pages 713-745, December.
    3. Datta, Deepak K. & Basuil, Dynah A. & Agarwal, Ankita, 2020. "Effects of board characteristics on post-acquisition performance: A study of cross-border acquisitions by firms in the manufacturing sector," International Business Review, Elsevier, vol. 29(3).
    4. Francis, Jennifer & Schipper, Katherine & Vincent, Linda, 2005. "Earnings and dividend informativeness when cash flow rights are separated from voting rights," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 329-360, June.
    5. Fosberg, Richard H. & Nelson, Michael R., 1999. "Leadership structure and firm performance," International Review of Financial Analysis, Elsevier, vol. 8(1), pages 83-96.

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