Agency Problems at Dual-Class Companies

  title={Agency Problems at Dual-Class Companies},
  author={Ronald W. Masulis and Cong Wang and F. Xie},
  journal={Corporate Law: Law & Finance},
  • Ronald W. Masulis, Cong Wang, F. Xie
  • Published 2006
  • Economics
  • Corporate Law: Law & Finance
  • Using a sample of U.S. dual-class companies, we examine how divergence between insider voting and cash flow rights affects managerial extraction of private benefits of control. We find that as this divergence widens, corporate cash holdings are worth less to outside shareholders, CEOs receive higher compensation, managers make shareholder value-destroying acquisitions more often, and capital expenditures contribute less to shareholder value. These findings support the agency hypothesis that… CONTINUE READING
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