Comparative Study On The Governance Performance Of Internet Enterprises With Dual-Class Share Structure

Internet enterprises have the typical characteristics of high growth,technology and innovation,and play an important role in the national economy.Due to the rapid technological updating and large investment in research and development,Internet enterprises have a large demand for capital.Due to the weak profitability in the early stage of development and the few assets available for mortgage,Internet enterprises mostly use equity financing,which increases the risk of the founders losing control,and requires dualclass share structures to protect the founders with scarce human capital.In order to protect the interests of investors,China has been banning enterprises from using dual-class share structures,leading to the loss of a number of high-quality Internet companies overseas.In order to improve the international competitiveness of China’s capital market and allow domestic investors to share the investment dividend,the dual-class share structures have been gradually liberalized from prohibition.Some enterprises have successfully listed in China with these equity structures,and some enterprises with dual-class share structures listed overseas have actively adopted the method of delisting or cross-listing in many places to return to the domestic market.Therefore,the study of the governance effect and improvement measures of dual-class share structures has important theoretical significance and practical value for the design of the ownership structure of Internet enterprises and the improvement of domestic dual-class share structures.This paper is based on principal-agent theory,control theory and human capital theory,takes the dual-class share structures of Internet enterprises Jingdong,Alibaba and Pinduoduo as the starting point,adopts literature research method,case analysis method and comparative analysis method to study the influence of three different dual-class share structure designs on governance performance.The analysis shows that the dual-class share structures guarantee the control position of the founders(team),and the founders(team)lead the strategic decision-making and daily operation management of the enterprises through the restructuring of the internal management organizations.Under the control of the founders(team),the agency costs of the case companies did not increase significantly.Benefiting from the protection of the dual-class share structures,the valuable human capital of the founders(team)has a positive effect on promoting the operation and management of the enterprises.This promoting effect is reflected in that the founders(team)focus on the future of the enterprises and actively carries out business model innovation and new business layout.The innovation ability of the case companies continues to enhance,the market value is recognized by investors,and the financial performance is good.At the same time,the study found that after the case companies adopted the dual-class share structures,the power of the founders(team)was too centralized,and there were problems of rigid corporate governance structure and weak internal supervision function,which increased the risk of infringement of the rights and interests of small and medium-sized shareholders.The action path of the dual-class share structures is to determine the corporate governance structure and governance personnel by protecting the control of the founders(team).The differences in governance effect of different dual-class share structures are mainly reflected in the different ways of realizing control rights and the different influences on corporate governance structures.Under the AB share structure of Jingdong,the founder dominates the shareholders’ meeting with a high proportion of voting rights,and other shareholders are difficult to participate in the company’s business decisions;Under the partnership system of Alibaba,the partners control the board of directors,and become the center of power,and override the shareholders’ meeting;From the perspective of shareholding structure design,the AB share structure and the partnership system of Pinduoduo can influence both the general meeting of shareholders and the board of directors.The dual-class share structure of Pinduoduo is not as strict as Jingdong and Alibaba in terms of special voting rights and partner rights setting.While ensuring the control of the founder team,it also leaves room for other shareholders to participate in corporate governance,which has a better effect on reducing the corporate governance risks brought by the dualclass share structure.Internet companies can learn from Pinduoduo when designing their shareholding structure.