Dual-Class Stocks in the Technology Sector - An Asset Pricing Study

Sammanfattning: This thesis analyses how dual-class structures impact stock performance in the U.S. Technology sector. By examining this specific sector, a niche intra-industry approach is adopted, which distinguishes the study from previous research within the field of dual-class stocks. Dual-class offerings are increasingly popular within the Technology industry, which in turn is driving regulatory change in favour of the controversial structure. Two matched portfolios are created in our study, one consisting of single-class firms and one consisting of dual-class firms. By using the Carhart four-factor regression model we investigate trends and differences between the two portfolios' performances. The resulting dual-class coefficients experience a larger spread and a greater divergence in regression characteristics, in contrast to the more stable single-class equivalents. The measured abnormal returns for the individual portfolios are similar albeit the t-statistics are low. When constructing a trading strategy based on the significant market risk coefficient, positive abnormal returns can be achieved at a significance level of 10%. Based on our findings, there is not sufficient evidence to confirm the conception that dual-class structures are generally negative for outside shareholders. Furthermore, we argue that industry-specific factors are likely to be important pieces of the dual-class performance puzzle.