Abstract
We investigate whether the use of dual class shares affect the financial policy within firms. We distinguish between firms that are controlled by owners with poor portfolio diversification (families) and those controlled by owners with diversified portfolios (institutions). Our findings suggest that family controlled firms frequently issue low voting equity and that deviations from one share - one vote facilitate the controlling owners' portfolio diversification, reduces firm leverage, and the family controlled firms' incentive to hedge. For firms controlled by institutions we do not find that deviations from one share - one vote affect financial policy. We conclude that deviations from one share - one vote affect the risk of the controlling shareholder's personal portfolio and thereby indirectly the firm's financial policy.
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