Dual-class share structure and innovation

Authors

Lindsay Baran
Arno Forst, The University of Texas Rio Grande ValleyFollow
M. Tony Via

Document Type

Article

Publication Date

10-13-2022

Abstract

Using a sample of dual-class firms matched with single-class firms possessing similar antitakeover protection, we find a positive association between disproportionate insider control and patent output, quality, creativity, research and development efficiency, and chief executive officer innovative risk taking. We also find, however, that the positive effects of disproportionate control on innovation are concentrated in financially constrained firms and firms in highly competitive industries, and that the positive effects dissipate within 10 years after the initial public offering. Most important, the positive effect of dual-class structures for innovation is conditional on the presence of innovative insiders in the firm. These findings imply that entrenchment through concentrated control in the hands of uniquely innovative corporate insiders provides a positive environment for innovativeness beyond the entrenchment effects of alternative antitakeover measures.

Comments

© 2022 The Authors. Journal of Financial Research published by Wiley Periodicals LLC on behalf of The Southern Finance Association and the Southwestern Finance Association.

Recommended Citation

Baran, L., Forst, A., & Tony Via, M. (2022). Dual-class share structure and innovation. Journal of Financial Research, 1– 34. https://doi.org/10.1111/jfir.12311

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Publication Title

Journal of Financial Research

DOI

10.1111/jfir.12311