An Institutional Study On Dual-class Share Structure

In 2020,the first company with a dual-class share structure was successfully listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange.Unlike listed companies in which voting rights and income rights are paired in exchange exchanges(e.g.one-share-one-vote structure),the dual-class share structure of Ucode Technology Co.,Ltd.is an asymmetrical distribution of voting rights and cash flow rights.The dual-class share structure has distinct advantages and disadvantages.On the one hand,it expands the trading space for both parties of equity financing,and at the same time enhances the effectiveness of both parties.On the other hand,it is a kind of equity institutional arrangement for public companies and has very strong negative externalities,which is easy to damage the small and medium-sized investors.interest.In view of the lack of theoretical and systematic research focusing on the dual-class share structure,considering that the dual-class share structure has a promoting effect on the high-tech industry,and the ongoing trials of the dual-class share structure in China,this paper starts from the macro-historical evolution of the dual-class share structure in the United States in the past two hundred years,and the analysis of the micro-case analysis of the dual-class share structure of technologically innovative Internet companies,and constructs multiple mathematical models with progressive logical levels.Regarding the three main aspects of founders,investors,and exchanges in the dual-class share structure,as well as several secondary aspects such as the government,the public,the law,and international influence,the practice of the dualclass share structure is based on the perspective of the enterprise before the public listing.The two stages of "the impact of the dual-class share structure on equity financing" and "the impact of the dual-class share structure on the overall society from the perspective of the exchange after public listing" involve theoretical analysis of the behavior of the subject.Taking history as a mirror can tell us about the rise and fall.The historical evolution and institutional change of the dual-class share structure are rooted in the game results of financing and control under different external conditions.The dualclass share structure has a long history and existed long before the emergence of the modern corporate system.There have been many rounds of rise and fall over hundreds of years.With the continuous increase in the amount of corporate financing and the number of shareholders,the dual-class share structure with unequal income rights and voting rights has gone through the one-person-one-vote partnership system,the excess regressive voting rights system,the capped one-share-one-vote system,there is no voting right system,and the enhanced voting right system that has prevailed until today.However,the existing research lacks the inherent logic of combing its institutional changes from the perspective of historical evolution.This article analyzes the internal reasons for the rise and fall of the dual-class share structure several times,shows the decision-making background of the relevant participants,and builds an analytical framework to reveal the evolution logic of the entire system: The consistent logic behind the institutional changes is that entrepreneurs,investors,and exchanges are based on their own economic rationality in the equity system arrangement game.With the change of external conditions,the game ability of all parties will change,and the double-layer equity structure will prosper or fade away.And other stakeholders such as the government,media,academics,etc.,together constitute the institutional background and external constraints of the dual-class share structure.The equity financing stage before the IPO,that is,on the premise of eliminating the noise interference caused by the regulators,exchanges,and public shareholders.Focusing on the research before the IPO of listed companies,analyze the causes of the dual-class share structure from the perspective of the decision-making body's trading space.First,allowing a dual-class share structure eases financing difficulties.Second,the dual-class share structure gives both parties to equity financing a Pareto improvement.However,it only needs to be applied to new economic industries that need to give full play to dedicated human capital.Obviously,this poses a challenge to the proposition of traditional property rights theory that enterprise control rights should be as consistent as possible with residual claim rights,and opens up space for further theoretical exploration.In the public listing stage after the IPO,the dual-class share structure has complex positive and negative externalities to the management and investors,so the contradictions of all parties are concentrated on the actual operating platform of the exchange.First of all,from the history of changes in the NYSE and Hong Kong Stock Exchange's policy on dual-class share structure,as well as the market's feedback on repeated policies at that time,the main consideration for corporate exchanges is profitability when considering whether to allow dual-class share structure.However,Chinese exchanges are not a corporate system,but a government-affiliated institution under the socialist system.Fairness is the only goal.There are many empirical facts in the development of the dual-class share structure.The author uses the method of micro-case analysis and further abstracts the typical characteristics,which confirms the theoretical conclusions drawn in some mathematical models,and also explores several double-tier ownership structure companies.The problems that have emerged in practice mainly include: the technological innovation industry is different from the traditional industry,and the double-layer equity structure stocks have been generally issued in the early stage of financing;the double-layer equity structure stock issued by the technological innovation industry in the financing stage is closer Bond nature;all types of common stock shareholders have lost influence on the shareholders meeting of the two-tier equity structure company;the two-tier equity structure has practiced interest-relatedism in practice and deviated from shareholder supremacy;the two-tier equity structure is in practice There is a problem that high-level voting rights can be transferred and inherited;in the practice of the United States,the double-tier shareholding structure is seriously inadequate in supervision.There are many empirical facts about the development of the dual-class share structure.The author uses the method of micro-case analysis and further abstracts the typical characteristics,including: high-tech enterprises are different from traditional enterprises,and the dual-class share structure has been generally issued in the early stage of financing.The dual-class share structure stocks issued by the emerging technology industry at the financing stage are closer to the nature of bonds;all types of common shareholders lose influence on the shareholders meeting of the dual-class share structure enterprise;the dual-class share structure has been practiced in practice Stakeholderism deviates from shareholder supremacy.In practice,the dual-class share structure has the problem that high-level voting rights can be transferred;and the dualclass share structure is seriously insufficient in US practice.