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Indiana University Bloomington

Department of Finance

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Research and Publications

Journal Articles

What's in a vote? The short- and long-run impact of dual-class equity on IPO firm values

2008, Journal of Accounting and Economics

Scott B. Smart, Ramabhadran S. Thirumalai, Chad J. Zutter


We find that relative to fundamentals, dual-class firms trade at lower prices than do single-class firms, both at the IPO date and for at least the subsequent five years. The lower prices attached to dual-class firms do not foreshadow abnormally low stock or accounting returns. Moreover, some types of CEO turnover are less frequent among dual-class firms, and in general CEO turnover is sensitive to firm performance for single-class firms but not for duals. Finally, when dual-class firms unify their share classes, statistically and economically significant value gains occur. Collectively, our results suggest that the governance associated with dual-class equity influences the pricing of dual-class firms.


Smart, Scott B., Ramabhadran S. Thirumalai, and Chad J. Zutter (2008), "What's in a vote? The short- and long-run impact of dual-class equity on IPO firm values," Journal of Accounting and Economics, Vol. 45, No. 1, March, pp. 94-115.


A practitioner-oriented version of this paper appears in September 2007 in Directorship magazine.