On the decision to go public with dual class stock

Arugaslan, Onur; Cook, Douglas O.; Kieschnick, Robert L.

doi:10.1016/j.jcorpfin.2009.07.004

Cited by 31 publications

(4 citation statements)

References 33 publications

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“…Early investigations by Bergström and Rydqvist (1990) based on information from listed Swedish corporations indicated this motivation. Subsequent studies, including Arugaslan et al (2010) using data on US listed companies from 1980 to 2008, reinforced this finding, supporting the notion that control retention is the predominant driving force behind DCS adoption for listing purposes. Public investors' motivations in accepting DCS are not merely passive.…”

Section: The Perspective Of the Decision-makermentioning

confidence: 77%

“…The decision-making perspective offers valuable insights into the factors influencing the adoption of DCS.The same applies to the choice of equity system, so existing literatures analyze the causes of DCS from two key perspectives: the motivations of controlling shareholders and the considerations of public investors. Controlling shareholders emphasis on control retention stems from a strong desire to maintain decision-making authority over company operations, rather than seeking to maximize private control gains (Arugaslan et al, 2010;Bergström & Rydqvist, 1990;Dittmann & Ulbricht, 2008;Lauterbach & Yafeh, 2011). Early investigations by Bergström and Rydqvist (1990) based on information from listed Swedish corporations indicated this motivation.…”

Section: The Perspective Of the Decision-makermentioning

confidence: 99%

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One Company, Two Classes: Unpacking the Rationale and Ramifications of Dual-Class Share Structure

Yue,

Hafiz Bajuri,

Khatib

et al. 2024

IJARBSS

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This research paper presents a thorough literature review on the origins of Dual-Class Sharing Structure (DCS) and their influence on agency problems. The study delves into existing research that predominantly supports the utilization of DCS, but also reveals inconsistent attitudes towards this structure. Throughout the investigation of DCS origins, we found that the existing literature revolved around three key aspects: market environment, corporate characteristics, and decision-makers, aligning seamlessly with the historical trajectory of DCS. In exploring agency theory, we found a major focus on whether DCS exacerbates or mitigates agency issues, which sparks divergent discussions due to the intricate interplay between internal and external governance. The conflicting perspectives surrounding DCS underscore the significance of further research in understanding the complex relationship between corporate governance and agency challenges. As the debate continues, our review contributes to the academic discourse, shedding light on the evolution of DCS and its impact on the broader corporate landscape.

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Section: The Perspective Of the Decision-makermentioning

confidence: 77%

Section: The Perspective Of the Decision-makermentioning

confidence: 99%

One Company, Two Classes: Unpacking the Rationale and Ramifications of Dual-Class Share Structure

Yue,

Hafiz Bajuri,

Khatib

et al. 2024

IJARBSS

View full text Add to dashboard Cite

show abstract

“…A distinguishing attribute of the dual-class structure is the distinct segregation of cash flow rights from voting rights. In contrast to single-class companies, dual-class entities distribute shares with varying voting rights, thereby affording pre-IPO shareholders the opportunity to optimize company value in the event of future acquisitions (Arugaslan et al, 2010). Wang and Yang (2015) ascertained that prior to the disclosure of earnings marked by a notable level of information asymmetry, the high-voting shares within listed companies can enhance price efficiency.…”

Section: Dual-class Structurementioning

confidence: 99%

“…This configuration of the dual-class structure assists managers in orienting their attention towards enduring corporate objectives and decisions, while concurrently sidestepping the constraints of shortterm market demands. Arugaslan et al, (2010) depicted that if managers want to retain uncontroversial control and diversify to reduce costs related to poor IPO diversification, the dual-class listing is appropriate. As Li et al, (2018) noted, managers prefer the dual-class structure to keep control over their wealth and spread its risks.…”

Section: Dual-class Structurementioning

confidence: 99%

The Effect of Dual-Class on Earnings Management: A Case of Chinese Listed Companies in US

Xiaoyu,

San,

et al. 2023

IJARBSS

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The dual-class share structure is a model that effectively segregates cash flow rights from control rights. Its primary purpose is to safeguard the control rights of the founding team and fortify resistance against hostile takeovers. Nonetheless, according to agency theory, the dual-class structure may intensify agency problems, potentially compelling managers to resort to heightened earnings management, either due to market pressures or pursuit of short-term profits. As a result, this research focuses on the impact of dual-class structure on earnings management. This study employs quantitative methods and conducts panel data regression analysis. The empirical findings reveal that companies with a dual-class structure exhibit a higher propensity for engaging in both accrual-based earnings management and real earnings management. Consequently, this paper contributes empirical evidence concerning the economic consequences of adopting the dual-class structure within emerging markets. In future research, it may be beneficial to contextualize the specific factors influencing the implementation of dual-class structures within a particular emerging market and explore whether there is a tendency for companies to eventually converge towards a unified structure. Keywords：Dual-class Structure, Accrual Earnings Management, Real Earnings Management IndroductionEarnings reflect the financial situation of a company and serves as the standard to measure management ability. Apart from stock price, firm value, and cash flow; earnings have been reckoned to affect decisions made by investors and market reaction (Wang, 2017). Therefore, listed companies often project a strong will to implement earnings management and manipulate earnings indicators purposively (Ning, 2004;Eriandani et al., 2020).

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Financial Restructuring

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On the decision to go public with dual class stock

Cited by 31 publications

References 33 publications

One Company, Two Classes: Unpacking the Rationale and Ramifications of Dual-Class Share Structure

One Company, Two Classes: Unpacking the Rationale and Ramifications of Dual-Class Share Structure

The Effect of Dual-Class on Earnings Management: A Case of Chinese Listed Companies in US

Financial Restructuring

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