Abstract
We compare the governance characteristics of dual-class firms to a matched sample of single-class firms. Dual-class firms allow firms to separate voting and cash flow rights, frequently allowing management to control the voting rights while only having a small proportion of the cash flow rights. With the control of the voting rights, management has the ability to choose governance characteristics to further entrench itself or help protect the rights of the minority investors. We show that dual-class firms are less likely to have independent boards and have lower levels of institutional ownership. However, dual-class firms are more likely to have separate individuals as CEO and Chairman of the Board and less likely to have staggered boards, which are considered to be good governance characteristics.
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