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Dual-class shares, external financing needs, and firm performance


Nüesch, Stephan (2012). Dual-class shares, external financing needs, and firm performance. SSRN 1773206, University of Zurich.

Abstract

This paper explores the effect of dual-class shares on firm performance using a unique law change in Switzerland as a source of exogenous variation. Unlike most of the related literature we do not adopt a one-size-fits-all approach but allow the effect to vary depending on a firm’s need for external finance. Based on nine years panel data of both firms affected and unaffected by the law change, we find that dual-class shares neither harm nor benefit firm performance on average. However, dual-class shares increase firm performance if the firm requires external finance and dual-class shares decrease firm performance if the firm does not require external finance.

Abstract

This paper explores the effect of dual-class shares on firm performance using a unique law change in Switzerland as a source of exogenous variation. Unlike most of the related literature we do not adopt a one-size-fits-all approach but allow the effect to vary depending on a firm’s need for external finance. Based on nine years panel data of both firms affected and unaffected by the law change, we find that dual-class shares neither harm nor benefit firm performance on average. However, dual-class shares increase firm performance if the firm requires external finance and dual-class shares decrease firm performance if the firm does not require external finance.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
JEL Classification:G30, G38, K22
Language:English
Date:2012
Deposited On:12 Dec 2012 10:24
Last Modified:13 Aug 2017 12:06
Series Name:SSRN
Number of Pages:31
Official URL:http://ssrn.com/abstract=1773206
Other Identification Number:merlin-id:7569

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