The Wrong Comparison

Dual-class shares have become a governance villain. The argument is clear enough, founders retain disproportionate voting power and minority shareholders cannot discipline them. Index providers seek to exclude them. Prominent academics have called for bans. Yet, the structures keep spreading anyway. Dual-class IPOs went from around one percent of all new listings in 1980 to nearly half in recent years, which is not obviously what you would expect if they were straightforwardly harmful. Sophisticated institutional investors also hold most of the freely floated shares in dual-class firms (not less).

The standard finding is that these firms trade at valuation discounts and that minority shareholders are harmed. But harmed relative to what exactly? The typical comparison is dual-class firms against the broad single-class universe, which turns out to be mostly nonfamily firms. 89% of dual-class firms are family firms. So, this comparison is not isolating a share structure effect at all. In work with Anderson, Ottolenghi, and Savor, we think this methodological point changes how the debate should be read. Once you split the sample and compare dual-class family firms to single-class family firms directly, the premium associated specifically with the dual-class structure is no longer statistically significant. Single-class family firms earn a similar premium. The votes are not what is being priced.

Family firms underperform by 280 to 440 basis points during adverse industry shocks, the range depending on the shock measure. That is the pattern you need if the premium reflects systematic risk rather than mispricing, and it is not the kind of result that is easy to get by accident in a sample this size and over this time period. Nothing here rules out mispricing entirely. But the test is right.

Why would investors demand a premium for family control at all. The concentrated stake is the mechanism, or at least that is the most straightforward way to say what we think is going on. When a family's wealth and name are tied to a firm across decades, commitments to suppliers and employees become credible in a way dispersed ownership cannot replicate. That is a productive economic function, which is perhaps not the framing that dominates governance discussions.

The calls for restricting dual-class shares rest on the comparison group result rather than the mechanism. Markets have not eliminated these structures, and that is probably not an accident.

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David Reeb is Mr. and Mrs. Lin Jo Yan Professor of Accounting and Finance at the National University of Singapore Business School.

This blog is based on a discussion held at the 2026 IESE-ECGI Corporate Governance Conference Family Firms: Purpose, Economic Performance and Social Impact. Visit the event page to explore more conference-related blogs.

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