Seminar – The Life Cycle of Dual Class Firm Valuation

Professor Anete Pajuste, Stockholm School of Economics

The study examines an extensive matched sample of US dual and single class firms in 1980-2017 from the time of their IPO, and document that the valuation difference between dual and single class firms varies over their life cycle. On average, around the time of the IPO, dual class firms have higher valuations than single class firms. Over time, this valuation premium tends to dissipate, whereas the difference between voting and equity stakes of the controlling shareholders of dual class firms (the “wedge”) tends to increase. The research also observes the rise in the fraction of dual class IPOs in the 21st century is accompanied by a larger mean initial premium and a smaller mean long run discount than in the 20th century. The results provide support for the availability of dual class structures at the IPO as well as the desirability of age based sunset provisions for such structures.

Speaker bio

Anete Pajuste is Professor of Finance and Head of Accounting and Finance Department at the Stockholm School of Economics (Riga), as well as a research member of the European Corporate Governance Institute (ECGI). She holds a PhD in Finance from the Stockholm School of Economics. She has also been a visiting research fellow at Harvard University. Her primary research focus is on the issues of investor protection, corporate governance and corporate finance.