Dual-bid corporate charters, entrepreneurial incentives and social efficiency
Sercu P. Vinaimont T.
2026Routledge
European Journal of Finance
2026#32Issue 3342 - 366 pp.
In the standard dual-class equity structure, the founder retains control via a blocking minority, typically achieved via multiple-vote share ownership. This strengthens the founders position in takeover fights or talks and thus stimulates entrepreneurship but, in The Economists wording, such companies are ‘shunned’ by many investors. To stimulate entrepreneurship with full respect of One-Share/One-Vote and without any blocking toehold, one can, instead, stipulate that a takeover requires the votes of both equity classes. Acquisitions happen after an open fight, where the incumbents only advantage is that they can block the attempt by counterbidding for just one class. The incumbents option to block the takeover by buying just one class of shares, we show, generates better terms if and when the firm is taken over, which translates in a higher IPO or PE value and, thus, stronger entrepreneurial incentives. The cost of the proposed charter is, inevitably, some degree of managerial entrenchment, but by our reckoning the benefits exceed the cost. The value-boosting effect is quite powerful when the potential for value-improving takeovers is high, notably for entrepreneurs who do have bright ideas but are not good at organization, or for incumbents facing rivals with big toeholds.
Corporate control , dual-class shares , efficiency , security design , takeovers
Text of the article Перейти на текст статьи
Finance Department, FEB, KU Leuven, Leuven, Belgium
Graduate School of Business, Nazarbayev University, Astana, Kazakhstan
Finance Department
Graduate School of Business
10 лет помогаем публиковать статьи Международный издатель
Книга Публикация научной статьи Волощук 2026 Book Publication of a scientific article 2026