The Study Of Consideration Ratios In The Dual-class Equity Structure Reform

Facing with the dual-class equity structure reform, the paper gives a thorough analysis of the underlying economical theories and separates them into three groups. The first reason for consideration is the history resort from the stockholders of tradable shares. Through theoretical and positive analysis of the splitting share structure, the author finds out the true reasons that had done harm to the tradable stockholders from the market's establishment and suggests an approach to solve the historical dispute after creating an IPO pricing model. Secondly, the paper reveals the nature of liquidity through a utility-indifferent asset-pricing model and makes an example using the real historical data. We conclude that the illiquidity discount is not the reason for consideration in the reform but the result of government policy and point it out that the illiquidity discount ratio is the non-tradable stockholders'bottom-line in the consideration. Thirdly, this paper gives an economical analysis to the market scale expansion consideration and also proposes different methods for different affects to the tradable shareholders. As the main conclusion of this paper, I give a whole analysis about the relationships of the three consideration factors that outline the whole economical theories supporting the share splitting reform as well as have done a positive analysis to support my theory, and make some suggestions which are useful for the on- going splitting share structure reform.