Study On Corporate Governance Model Of Dual-class Share Structures

The dual-class share structure is a means of effectively controlling the firm by separating cash flows and control right. Different from the traditional one-vote with one-share system, the dual-class share structure refers to the shares are divided into high and low voting rights, in which high-voting stock has more decision-making power.The dual-class share structure in the early 20th century corporate law is a non-mainstream system, but as an important anti-M&A initiatives in the 1980s it began to be more adopted by the companies in the United States, and because it is contrary to the traditional one-vote with one-share system the dual-class share structure is subject to regulatory restrictions. Later, with the three major US exchanges unified regulatory policy to allow listed companies in the initial public offering of shares using the dual-class share structure, the system has been widely adopted by listed companies. With the development of practice, corporate governance empirical research results have gradually shown that with this corporate governance model, the valuation and the long-term performance of the dual-class share structure companies is also very good. This is contrary to the negative view of the traditional corporate governance literature on the the dual-class share structure, which makes the views of the dual-class share structure in the academic circles different. New research is needed to test the governance effect of the dual-class share structure.In this context, this paper analyzes the development of the dual-class share structure companies in the US market in the recent 20 years, and focuses on the implementation of the dual-class share structure governance model in US-listed Chinese companies. On this basis, the research on the valuation of the dual-class share structure companies is carried out, and the valuations of the dual-class share structure and non-dual-class share structure are evaluated by using the valuation index of price-earnings ratio and price-to-sales. On the other hand, the multi-case studies of the representative of the dual-class share structure companies is carried out.The main conclusion of this paper is that the dual-class share structure provides the advantages of preventing the dilution of control rights, stabilizing management teams, playing the innovation spirit of the entrepreneurs and so on. But the dual-class share structure also violates the principle of equality of share-holders, which is "one share one right". It separates the stock right from the voting power. It also leads the too powerful control rights of managers. Therefore, some securities markets including Chinese mainland and Hongkong SAR's hold the negative attitudes. Currently, the reform of Chinese securities market aims at relax control, enhanced supervision. In this context, the dual-class shares structure should be tried on the basis of setting certain conditions. Meanwhile, to avoid the too powerful control rights of managers, the supervision mechanisms need to be improved to protect the interests of mid-and-small investors.The main innovations of this paper:The market practice of the dual-class share structure is studied systematically, and the valuation of dual-class share structure and non-dual-class share structure is compared by using the indexes of price-earning ratio and price-to-sales, academic research on the dual-class share structure is enriched. At the aspect of policy suggestion, the basic idea of introducing the dual-class share structure in China's capital market is put forward, and the supporting measures of the dual-class share structure governance model are discussed from the aspects of implementation of shareholder collective litigation system and improvement of information disclosure system. Which can provide reference for the introduction of implementation of shareholder collective litigation system governance model.