Publication Type
Journal Article
Version
acceptedVersion
Publication Date
9-2020
Abstract
The proliferation of dual-class structures in the US stock market presents a controversial trend since such shares are traditionally deemed to damage governance quality. We study the relationship between 362 firms with dual-class shares and their innovativeness using patent citations from Google Patents over the 1976 through 2006 period. We find dual-class shares have significant innovation effect in high-tech sectors, hard-to-innovate industries, firms with higher external takeover threat and firms heavily dependent on external equity financing. We also document a positive causality relationship between dual-class structures and the quality of innovation. The channel for this causal relationship is the protection mechanism by which managers can take a long-term view. From a policy perspective, regulators should promote a corporate governance system that protects corporate long-term interest for shareholders.
Keywords
Dual-class, Innovation, Patents, Citations, Corporate governance
Discipline
Corporate Finance | Technology and Innovation
Research Areas
Finance
Publication
Economic Modelling
Volume
9
First Page
347
Last Page
357
ISSN
0264-9993
Identifier
10.1016/j.econmod.2020.06.017
Publisher
Elsevier
Embargo Period
4-14-2022
Citation
CAO, Xiaping; LENG, Tiecheng; GOH, Jeremy C.; and MALATESTA, Paul.
The innovation effect of dual-class shares: New evidence from US firms. (2020). Economic Modelling. 9, 347-357.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6682
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.econmod.2020.06.017