December 2007

Letting Go of Voting Rights May Be a Good Investment Strategy
Dividends paid by a dual class stock are at least as informative for dual-class firms as for single-class firms, if not more so. Earnings, in contrast, are less informative for dual-class firms than for single-class firms. Reduced management accountability, which both accompanies and stems from the separation of cash flow rights from voting rights in dual-class firms, is responsible for the reduced usefulness of earnings information.

Jennifer Francis

Katherine Schipper

Linda Vincent