재무연구 제 권 호 (2007년 4월)
Asian Review of Financial Research, Vol., No..
pp.1968~2012
pp.1968~2012
Which Monitors Monitor the Most? Dual-Stock Structure and Corporate Governance
Hoje Jo Department of Finance, Leavey School of Business, Santa Clara University, El Camino Real, Santa Clara, CA
Young Sang Kim Department of Finance, College of Business, Northern Kentucky University, BEP 425, Nunn Drive, Highland Height, KY
We examine the effects of several corporate governance and monitoring mechanisms on the choice of dual-class status and firm performance of dual-class firms. Employing 736 firms that implemented dual-class and 7,027 single-class firms during the period 1996-2002, we find that dual-class firms tend to be larger, higher director ownership and institutional ownership, lower blockholdings, and smaller fraction of independent outside directors on their board than those of single-class firms. In addition, we observe that dual-class firms are followed by smaller number of security analysts. After correcting for endogeneity bias, our regression results show that firms with higher analyst coverage and lower wedge, measured as the difference between voting rights and cash flow rights, are strongly associated with Tobin’s q. In contrast, blockholders’ ownership, board independence, and institutional ownership play a relatively insignificant role in enhancing Tobin’s q. We interpret our results to mean that security analysts are the most effective monitoring mechanism that influence both the dual-class choice and firm performance. Our results are not attributed either to the difference in firm size or to an industry effect.
Hoje Jo
Young Sang Kim
We examine the effects of several corporate governance and monitoring mechanisms on the choice of dual-class status and firm performance of dual-class firms. Employing 736 firms that implemented dual-class and 7,027 single-class firms during the period 1996-2002, we find that dual-class firms tend to be larger, higher director ownership and institutional ownership, lower blockholdings, and smaller fraction of independent outside directors on their board than those of single-class firms. In addition, we observe that dual-class firms are followed by smaller number of security analysts. After correcting for endogeneity bias, our regression results show that firms with higher analyst coverage and lower wedge, measured as the difference between voting rights and cash flow rights, are strongly associated with Tobin’s q. In contrast, blockholders’ ownership, board independence, and institutional ownership play a relatively insignificant role in enhancing Tobin’s q. We interpret our results to mean that security analysts are the most effective monitoring mechanism that influence both the dual-class choice and firm performance. Our results are not attributed either to the difference in firm size or to an industry effect.
