Dual class firms: Capitalization, ownership structure and recapitalization back into single class

Amoako‐Adu, Ben; Smith, Brian F.

doi:10.1016/s0378-4266(00)00107-2

Cited by 104 publications

(45 citation statements)

References 29 publications

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“…Hence, the dual class structure is more likely to be employed in situations which managerial vote ownership yields benefits (e.g., by encouraging managerial investment in firm-specific human capital), but personal wealth constraints faced by managers imply that investments can be made only if substantial amounts of equity are raised in the capital market (DEANGELO & DEANGELO, 1985, p. 61). This rationale is consistent with the view dual class shares are temporary structures kept until when the firm needs new equity capital for further expansion and growth (AMOAKO-ADU & SMITH, 2001).…”

Section: Critical Review: Why Do Dual Class Structures Resist Despitesupporting

confidence: 81%

Why they persist? An analysis of dual class structures and the unification process in the U.S. and Brazil

Pinto

2014

Rev. direito GV

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The unbundling of cash flow and voting rights has been severely criticized worldwide and yet, the dual class structure persists as an alternative widely adopted by firms. This paper aims to provide some explanations as to why this happens, particularly from a comparative perspective that analyzes the contexts of Brazil and the United States, two countries that take a rather different approach regarding corporate ownership structures. In order to do so, it reviews the panorama of dual class structures, their main characteristics and the unification process that both countries underwent. On top of these discussions, this paper presents some arguments to explain why the dual class structure still persists both in Brazil and in the U.S. (although with variable intensity), despite all the criticism aimed at the segregation of cash flow and voting rights.

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Section: Critical Review: Why Do Dual Class Structures Resist Despitesupporting

confidence: 81%

Why they persist? An analysis of dual class structures and the unification process in the U.S. and Brazil

Pinto

2014

Rev. direito GV

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“…However, the inverse relation between 2-day CAR and dual issuance is marginally significant. This finding supports the view that dual-class share structures lead to large agency costs (DeAngelo and DeAngelo, 1985;Bebchuk et al, 2000;Amoako-Adu and Smith, 2001). Therefore, investors relate the decision by dual-class firms to repurchase block shares, via private negotiations, with the extraction of higher private benefits.…”

Section: And the Variance Inflationsupporting

confidence: 79%

Governance quality and privately negotiated stock repurchases: Evidence of agency conflict

Harris

Glegg

2009

Journal of Banking & Finance

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“…These structures allow controlling shareholders to retain control with relatively low levels of investment (Cuervo, 2002). In addition, pyramidal structures facilitate the stability of the dominant owner's control because these devices help him/her defend his/her position (e.g., Amoako-Adu and Smith, 2001;Daines and Klausner, 2001;Santana et al, 2009). Therefore, pyramids reduce transaction costs in developing lobbying policies .…”

Section: Theoretical Arguments Political Connections and Dominant Ownersmentioning

confidence: 99%

Politically connected firms in Spain

Pérez

Sánchez

Martín

2015

BRQ Business Research Quarterly

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The goal of this study is to analyze the incidence of dominant owners in the probability of the presence of political directors and the effect of said presence on firm value. The study uses a sample of non-financial Spanish companies listed on the Spanish Stock Exchange over the period 2003–2012. The results show that around half of the firms have at least one ex-politician on their board of directors. Furthermore, the results indicate that dominant shareholders’ voting rights and family nature have a negative effect on the likelihood of having ex-politicians on the board of directors. Moreover, the results show that the presence of political connections positively affects firm value. Further analyses show that this relationship is dependent upon the nature of the dominant owner, the use of pyramidal structures, the tenure of board members and the political directors’ ownership stake.

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Dual class firms: Capitalization, ownership structure and recapitalization back into single class

Cited by 104 publications

References 29 publications

Why they persist? An analysis of dual class structures and the unification process in the U.S. and Brazil

Why they persist? An analysis of dual class structures and the unification process in the U.S. and Brazil

Governance quality and privately negotiated stock repurchases: Evidence of agency conflict

Politically connected firms in Spain

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