Corporate Payouts in Dual Classes

This paper provides empirical evidence showing that dual-class firms use dividend payments to mitigate agency problems while using repurchases of superior shares to maintain the private benefits of control. With a sample of dual-class firms from 1994 to 2015 that have both their superior voting shares and inferior voting shares publicly traded, we show that dual-class firms are more likely than a matched sample of single-class firms to pay dividends in both share classes, but they are more likely to repurchase their superior shares than single-class firms and their inferior shares. These findings are consistent with our agency payout hypothesis.