Dual-class Share Structure and IPO Long-run Performance: An Empirical Study of the Swedish IPO market

Abstract: This study analyzes the effects of a dual-class share structure on firm long-run underperformance following an IPO. The sample consists of 204 IPO firms during 1998-2007, whereof 86 had a dual-class share structure and 118 had a one-share one-vote structure. When testing for long-run IPO underperformance we use Cumulative Abnormal Returns (CAR), mean Buy-and-Hold Abnormal Returns (BHAR) and the Calendar-Time approach. When using CAR we use value-weighted returns whereas when using the two latter methods we use both equally-weighted (EW) and value-weighted (VW) returns for our calculations. In line with what earlier has been found on the US equity market, we find no support that dual-class IPOs should perform worse than single-class IPOs in the long-run; however, we find some indications of the opposite relationship. In addition, regression results on price-to-book indicate that the Swedish market seems to take into account the positive long-run performance of dual-class IPO firms.