Impact of Dual Class Shares on Voting Power and Dividend Distribution

Very Hard Equity Markets And Instruments Common Shares

XYZ Corp, a publicly traded company, offers two classes of common shares: Class A and Class B. Class A shares provide one vote per share and have priority in dividends, while Class B shares offer ten votes per share but are not entitled to dividend priority. Recently, XYZ Corp announced a significant dividend increase due to record profits, which raised questions among investors about the impact of the share structure on voting power and dividend entitlements.

Considering this structure and the market conditions surrounding XYZ Corp, which of the following statements accurately reflects the implications of investing in Class A versus Class B common shares?

Investors in Class A shares have greater influence over corporate decisions due to their higher voting power relative to Class B shares.

While Class B shares have superior voting rights, their lack of dividend preference means that Class A shareholders benefit more in periods of high profitability.

Both Class A and Class B shareholders will receive equal dividend payouts despite the differences in voting rights and dividend priority.

Hint

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