OWNERSHIP OF EQUITY IN DUAL-CLASS FIRMS

The paper investigates the hypothesis that large shareholders use shares with differential voting rights for the purpose of expropriating minority shareholders. Consistent with several theoretical arguments but inconsistent with the expropriation hypothesis, we find that large shareholders own much more equity than required for control. We also show how the law can construct a regulation which reduces the opportunity for expropriation and at the same time allows for the possible benefits of differential voting rights. © 1990.