Why Do IPO Firms Choose Dual-Class Structures?
81st Annual Meeting of the Academy of Management 2021: Bringing the Manager Back in Management, AoM 2021
Dual-class structure (DCS) is considered to be an entrenchment mechanism that leads to failure of market for corporate control and increases the principal-principal agency cost. In contrast, based on a hand-collected sample of IPO firms, we find firms that pursue high-risk growth strategies with long-term horizons, such as innovation, internationalization, and acquisition are more likely to adopt DCS. We propose that DCS is largely adopted to protect firms from the short termism of public markets and to avoid control contests in the market for corporate control.
Nitin Kumar Singh and Susanna Khavul. "Why Do IPO Firms Choose Dual-Class Structures?" 81st Annual Meeting of the Academy of Management 2021: Bringing the Manager Back in Management, AoM 2021 (2021). https://doi.org/10.5465/AMBPP.2021.40