How Does Dual-class Share Structure Affect Corporate Performance?

The most important purpose of adopting a dual equity structure is to safeguard the control of the founding team over the company,and also to improve the financing of the company.Existing studies have verified the contribution of dual ownership structures to firm performance,but how does it affect it? How does it improve firm performance? The answers to these questions are still not well researched.Based on the existing studies,this paper adopts a combination of normative research and case studies to analyze the intrinsic mechanism of dual shareholding structure affecting corporate performance with Meituan Dianping as the research object,and at the same time proposes preventive suggestions on the potential risk points affecting the mechanism.This paper finds the following mechanisms through which Meituan Dianping’s dual equity structure affects corporate performance.First,the dual ownership structure enables the founding team to control the company at a lower decision cost through different voting arrangements.Second,the control of the company is controlled by the founding team to ensure that the founders have a significant influence on the company’s decision making.The impact of control on decision making is reflected in reduced costs of management decisions,changes in strategy and business investment,and financing preferences.Finally,the right decisions of the company have a significant impact on corporate performance,which is reflected in improved operating performance,improved asset operation capacity,and reduced financial risk.Overall corporate performance improved.This paper finds that the key to Meituan Dianping’s dual equity structure to improve corporate performance is the ability of the founding team to control the company and to leverage their experience knowledge and skills to maximize the effectiveness of that control,but the lack of oversight makes control potentially damaging to overall corporate performance.In order to better utilize the institutional advantages of dual shareholding structure,companies should be further encouraged to adopt this system,while the beneficiaries of different voting rights need to strengthen the scientific nature of each decision;for the supervision of control,improvements can be made by increasing the disclosure of the process of corporate governance committee and corporate information disclosure.The main improvements and innovations of this paper are: the mechanism of the dual equity structure affecting corporate performance is reviewed and analyzed in detail with the theoretical framework and practical applications.The research in this paper helps to improve the theoretical framework for the study of the relationship between dual equity structure and corporate performance.