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

In: Corporate Governance

Author

Listed:
  • Paul A. Gompers
  • Joy Ishii
  • Andrew Metrick

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. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Paul A. Gompers & Joy Ishii & Andrew Metrick, 2010. "Extreme Governance: An Analysis of Dual-Class Firms in the United States," NBER Chapters,in: Corporate Governance National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:12189
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