Dual-class ownership, borrowing costs, and the life cycle effect

We examine the borrowing costs of dual-class firms from a life-cycle perspective. Using a sample of U.S. listed firms, we find that dual-class firms face significantly higher loan spreads than single-class firms only during the growth stage, with no meaningful differences in the introduction or maturity stages. This result is robust to a range of tests addressing self-selection, simultaneity, and omitted variable concerns. We interpret this pattern through the hold-up theory of relationship lending: bank-dependent dual-class firms exhibit a hump-shaped borrowing cost profile over the life cycle, with spreads peaking in the growth stage when banks exploit informational advantages. Our findings indicate that the cost of dual-class ownership is inherently dynamic and operates through debt financing channels.

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Publication Details

Journal
Review of Quantitative Finance and Accounting
Published
2026-06-26
DOI
https://doi.org/10.1007/s11156-026-01538-1
Primary Topic
Experimental Behavioral Economics Studies
Type
article
Field-Weighted Citation Impact
0.00

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article

Dual-class ownership, borrowing costs, and the life cycle effect

Min‐Teh Yu, Yang Zhao, Xiaodan Li
Review of Quantitative Finance and Accounting
Experimental Behavioral Economics Studies
article

Dual-class ownership, borrowing costs, and the life cycle effect

Min‐Teh Yu, Yang Zhao, Xiaodan Li
article en

Abstract

We examine the borrowing costs of dual-class firms from a life-cycle perspective. Using a sample of U.S. listed firms, we find that dual-class firms face significantly higher loan spreads than single-class firms only during the growth stage, with no meaningful differences in the introduction or maturity stages. This result is robust to a range of tests addressing self-selection, simultaneity, and omitted variable concerns. We interpret this pattern through the hold-up theory of relationship lending: bank-dependent dual-class firms exhibit a hump-shaped borrowing cost profile over the life cycle, with spreads peaking in the growth stage when banks exploit informational advantages. Our findings indicate that the cost of dual-class ownership is inherently dynamic and operates through debt financing channels.

Review of Quantitative Finance and Accounting
Nankai University (CN), National Tsing Hua University (TW), Nanjing University of Science and Technology (CN), National Chengchi University (TW)
National Science and Technology Council, National Natural Science Foundation of China, National Science and Technology Council
Openalex Percentile: Top 6%
Experimental Behavioral Economics Studies
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