Companies With Two Classes of Stock Are Worth 15% Less, Professor Says

Scott Smart, a professor at Indiana University, told CNBC’s “Street Signs” that companies with two classes of stock are, on average, worth about 15% less per share than similar companies with a single class of stock.

He said the difference in value holds over time, but stocks of similar companies will perform about the same.

“Where dual class and single class firms seem to differ is in the question of control -– who runs the company and under what circumstances,” Smart said. “What you typically see in a single-class firm is that if it’s not doing well, the top management team has a good likelihood of turning over. But in a dual class firm, we really don’t see that –- the management team is well entrenched, and it's tough for outside investors to move them out if they’re not doing well.”

Dow Jones has two classes of stock that allow the Bancroft family to retain control. They have rejected a $60-a-share offer from Rupert Murdoch's News Corp., perhaps to the dismay of holders of the common stock who have seen its price languish.