The Rise of Dual-Class Stock IPOs

We create a novel dataset to examine the nature and determinants of dual-class IPOs. We document that dual-class firms have different types of controlling shareholders and wedges between voting and economic rights. We find that the founders' wedge is largest when founders have stronger bargaining power. The increase in founder wedge over time is due to increased willingness by venture capitalists to accommodate founder control and technological shocks that reduced firms' needs for external financing. Greater founder bargaining power is also associated with a lower likelihood of sunset provisions that eliminate dual-class structures within specified periods