How Innovative Enterprises Protect Outsider Investors When Applying Dual-class Share Structure?

Recent years,both HKEX and the SGX have carried out the reform about dual-class share structure,which has attracted the attention of domestic government and market.At the same time,due to the restrictions of domestic policies on dual-class share structure,many innovative enterprises adopting dual-class share structure are forced to overseas listing,which not only increases the financing cost of enterprises,but also keep domestic investors from investing in high-quality enterprises.As the mai force of innovative enterprises,many"Unicorn"enterprises also adopt the dual-share structure,which becomes a block for them to be listed in China and increases the difficulty of financing.These phenomena cause the regulators to ponder the dual ownership structure.In order to solve the problem of listing and financing of innovative enterprises in China,Xi Jinping announced the establishment of science and innovation board in the Shanghai stock exchange at the end of 2018.In early 2019,Shanghai stock exchange officially allowed innovative enterprises to list on science and innovation board with dual share structure.However,due to the high separation of voting and ownership under dual-class share structure,investors in the market still have doubts about dual-class share,for fear of being trapped in the dilemma of"being harvested".Thus,it makes sense to study how innovation enterprises protect the outside investors under dual ownership structure.This paper starts from the differences between innovative enterprises and traditional enterprises in founders' talents,capital requirements and development characteristics,and expounds the rationality of innovative enterprises adopting dual-class share structure,and then put forward the core point and difficulty of outside shareholders'interests protection,and then based on the theory of shareholder's heterogeneity,this paper expounds how innovation enterprises protect outside investors'interests under dual-class structure.Then the case study of Alibaba group verifies the relevant theoretical analysis.Finally,this paper compares the performance in outside investors'interest protection of innovation enterprises,which are listed in the U.S.and adopt different equity structures,finding that innovation enterprises with dual class share structure is not worse than those with single class share structures.Existing literatures get a general conclusion based on two rights separation when discussing the agency problems under dual class share structure,this paper studies the agent problem to a more detailed extent,and proposes the solution from the perspective of founders'motivation,rich the researches in agent cost under dual class share structure.The conclusion of this paper is helpful for investors to think more comprehensively about the security of dual-class share structure in innovation enterprises,helping investors to identify the innovation enterprises,which are worth investing in,and promote the reform and development of equity structure.