Voluntary disclosure and ownership structure: an analysis of dual class firms

This study focuses on the association of voluntary compensation disclosure and ownership structure. It provides evidence that the detachment of control and cash flow rights in dual class share firms is associated with lower levels of compensation disclosure. This association is incremental to the level of managerial ownership and family ownership. The study attributes these disclosure results to the concealment of excess compensation in dual class share firms. Consistent with this explanation, the study finds that managers in dual class share firms earn higher compensation relative to their single class counterparts. An analysis within dual class firms also reveals that compensation disclosure is decreasing in managers’ voting control but increasing in their cash flow rights consistent with a private control benefits explanation. To examine these research questions, the study develops a contextual measure of compensation disclosure that attempts to capture firms’ economic bases for award of compensation. Copyright Springer Science+Business Media, LLC. 2014