Research On The Effects Of Dual Class Structure On Inefficient Investment

On April 24,2018,the Hong Kong Exchanges and Clearing Limited(HKEx)announced that it would accept the listing of companies with dual class structure on April 30.Li Xiaojia,chief executive of the HKEx,said the listing system was the biggest reform in 24 years and pushed-out after four years of unremitting efforts.Four years ago,with the failure of applying for a listing in Hong Kong,Alibaba Group,the e-commercial gaint of China,turned to the embrace of the US capital market because of the HKEx couldn't accommodate the “Ali partnership system”,which made the HKEx missed the excellent corporates.The massive listing of Ali has made the dual class structure gradually attract people's attention.In addition,in recent years,with more and more Chinese Internet companies,such as Baidu and JD,has been listed in American capital market,Song Liping,the general manager of Shenzhen Stock Exchange,suggested that the system design of technological enterprises should retain some space for the dual ownership structure.And it shows that in the rapid development of innovative enterprises,the traditional single equity structure can not meet the heterogeneous demands of the founders and investors.Global capital markets have been divided on the advantages and disadvantages of dual class structure,which is more worth to study.There is few domestic or foreign literature discusses on the investment efficiency of Dual Class Structure,or how does the different structure of equity distribution of Dual Class Structure companies affect to the investment behaviors.The dissertation researches on the investment efficiency of Chinese Dual Class Structure companies which were listed in U.S.,in order to provide a reference for the management of these companies,and the acceptance issue of Dual Class Structure by the capital market in China.The dissertation compares and analyses the difference of investment efficiency between Dual Class Structure companies and the single ones which were listed in U.S.,based on the samples of them from 2008 to 2017.Since the voting right and cash-flow right of Dual Class Structure companies are separated,them of the management shareholder as well as the extent of separation are analyzed,for how they affect the non-efficiency investment.We fined that both type of companies has problem of non-efficiency investment,and the Dual Class Structure companies show the behavior of over-investment compared with the single one.Compared with single equity structure companies,improving the cash flow rights of management shareholders would contribute more to restrain the non-efficiency investment(over-investment)in dual class structure companies,and as the extent of voting rights and separation increasing,the investment efficiency(over-investment)would be reduced more.