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| Author: | Smart, S. B. Zutter, C. J. |
| Title: | Control as a motivation for underpricing: a comparison of dual and single-class IPOs |
| Journal: | Journal of Financial Economics
2003 : JUL, VOL. 69:1, p. 85-110 |
| Index terms: | Initial public offerings Pricing Corporate structure Company ownership |
| Language: | eng |
| Abstract: | The authors find that dual-class firms experience less underpricing than single-class firms and explore several hypotheses which explain this phenomenon. Compared to single-class firms, dual-class companies have slightly higher post-IPO institutional ownership and experience fewer control events. Although dual-class firms achieve a lower underpricing cost, they trade at lower prices relative to earnings and sales than single-class IPOs. This pricing differential, combined with evidence that dual-class managers earn higher compensation and that dual-class shares are common among media and entertainment industry IPOs, suggests that dual-class ownership structures protect private control benefits. |
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