Dual-Class Vs. Single-Class Firms: Information Environment Open Access
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I compare the information environment, in particular information asymmetry and predisclosure information, of dual-class firms with those of single-class firms. In general results indicate that dual-class firms have higher information asymmetry compared to single-class firms. Dual-class firms that need additional external capital have lower information asymmetry compared to those that do not need additional external capital. This is consistent with the notion that companies increase disclosures when they raise external capital to lower the cost of capital. Despite the disclosure increase, dual-class firms that need additional external capital still have higher information asymmetry compared to single-class firms that also need additional external capital. However, using predisclosure information to examine the information environment, I do not find that dual-class firms are any different from single-class firms.