Corporate payout policy in dual-class firms

Bradford D. Jordan, Mark H. Liu, Qun Wu

Research output: Contribution to journalArticlepeer-review

37 Scopus citations


We examine corporate payout policy in dual-class firms. The expropriation hypothesis predicts that dual-class firms pay out less to shareholders because entrenched managers want to maximize the value of assets under control and the associated private benefits. The pre-commitment hypothesis predicts that dual-class firms pay out more to shareholders because firms use corporate payouts as a pre-commitment device to mitigate agency costs. Our results support the pre-commitment hypothesis. Dual-class firms have higher cash dividend payments and total payouts, and they use more regular cash dividends rather than special dividends or repurchases, compared to their propensity-matched single-class firms. Dual-class firms with severe free cash flow-related agency problems and few growth opportunities rely even more on corporate payouts as a pre-commitment mechanism. We also rule out the alternative explanation that dual-class firms pay out more because super-voting shareholders lack the ability to generate home-made dividends by selling shares since super-voting shares are often non-tradable or very illiquid.

Original languageEnglish
Pages (from-to)1-19
Number of pages19
JournalJournal of Corporate Finance
StatePublished - Jun 2014


  • Cash flow rights
  • Dividends
  • Dual class shares
  • Payout policy
  • Stock repurchase
  • Voting rights

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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