Conflicts Of Interest And Regulatory Responses In Differentiated Voting Rights Structure In China

In the last decades,with the rise of technology plant,more and more companies chose DVR structure for IPO.In order to attack more science and technology innovation companies,more and more exchanges changed listing rules and opened to companies with DVR structure.For example,after losing the Alibaba IPO in 2013,the HKEx began to consider listing rule change and in 2018 HKEx made the change.In February 2017,the SGX issued a consultation paper for a possible listing framework for DVR structure.To support Shanghai's bid to be an international financial center and technological innovation center,and to improve the domestic stock market,President Xi Jinping announced in his keynote speech at the opening of the first China International Import Expo in Shanghai in November 2018 that the SSE will launch a new STAR board,and the new trading platform will experiment with a registrationbased system for listed companies.Then Policy-driven rather than market-driven DVR structure were approved.It's really a big step forward which means SSE face two challenges—the transformation of the approval system to the registration system and the transformation of “one share,one vote” to “one share,differentiated vote”.What behind these exchanges' attempts to change listing rules is the global competitive pressure.Faced with poor investor's protection,the immature market mechanisms and the lack of accountability rules in the judicial practice,the sudden promulgation of DVR structure has raised expectations as well as concerns from scholars,lawyers,companies,exchanges,and China Securities Regulatory Commission(CSRC).The debate on DVR structure has been going on for nearly a hundred year.There are more and more new theories and empirical evidence to prove the legitimacy of DVR structure,but these evidences still cannot eliminate people's doubts about it.The consultation papers issued by exchanges in emerging markets illustrate the reasons for accepting the DVR structure through theoretical or empirical research in developed markets,especially in America,and intend to draw on the regulatory experience of developed markets.However,experience in developed markets cannot solve problems in emerging markets,and experience in highly separated ownership capital markets cannot solve problems in highly concentrated ownership capital markets.In emerging markets,what is the performance of DVR structure,and how to regulate it still remain a question.As a representative of emerging markets,the research on STAR board is necessary.In terms of structural arrangement,this paper forms the following research framework based on the following ideas.The first chapter aims to define and justify the structure of differentiated voting rights.First of all,based on the analysis of the basic concepts of the differentiated voting rights structure,a distinction is made between the differentiated voting rights structure,the control mechanism of the board of directors,and the class share system.Secondly,this article analyzes the legitimacy basis of the differentiated voting rights structure from two perspectives: theoretical basis and realistic demand.On the one hand,the theoretical basis behind the structure of differentiated voting rights has gone from "one share one right" to "same share different rights,from shareholder supremacy theory to stakeholder theory,from shareholder homogeneity to shareholder heterogeneity,from The transformation from agency costs to "commission-agent costs";on the other hand,the actual demand for differentiated voting rights,such as the drive for the development of technological innovation,the need for mixed ownership reform,the maintenance of control rights and the need for anti-acquisition,all show the unique value of differentiated voting right structure.Based on the analysis and introduction in Chapter 1,the second chapter explores the companies with differentiated voting rights and discusses the conflicts of interest that may exist under differentiated voting rights.From the outside,there is regulatory competition between exchanges,and the exchange itself has competition for "public good" and "private benefits." From the inside,there is a short-term profit-seeking and long-term operating relationship between super voting rights and ordinary shareholders.There is a danger that the interests of the company will be embezzled between the shareholders with super voting rights and the company.The third chapter,from the perspective of extraterritorial practice and supervision,selects emerging capital markets as research objects,and compares in detail the regulatory rules and application of Singapore,Hong Kong,and mainland capital markets with respect to the structure of differentiated voting rights.In terms of internal regulatory rules,the rules of the exchanges in Singapore,Hong Kong and the MainlandThe corporate governance rules are compared,and their advantages and disadvantages are analyzed.In terms of external regulatory rules,the rules of protection of shareholders' right to information in Singapore,Hong Kong,and the Mainland were compared with the rules of ex post judicial relief,and their advantages and disadvantages were analyzed.Based on the comparative analysis of rules,a typical differential voting structure company was selected for empirical analysis,and the impact on the company under different regulatory rules was compared.Based on the previous three chapters,combining the real problems in China 's capital market,Chapter IV proposes suggestions for improving the supervision of China 's differentiated voting rights structure in terms of pre-regulation and ex-post regulation.Due to the weak self-protection ability of investors in China's capital market,the immature market mechanism,and insufficient court review ability,China must strengthen the design of ex ante systems in particular.It can mainly start with sunset clauses,strengthen the board supervision mechanism and enforce information disclosure.At the same time,ex post judicial remedies should be gradually promoted,and fairness review under directors' faithful obligations should be promoted.However,in the long run,strict ex-ante restrictions have weakened the flexibility of the structure of differentiated voting rights,and the shift from paternalism to market dominance is a long-term solution.