Research On The Control Arrangement Of Listed Company

An application of Alibaba Group, according to which Alibaba can introduce an original structure called Alibaba Partnership after an IPO, was rejected by regulators of Hong Kong’s capital market. However, the same application has been accepted by regulators of United States’ s capital market. This event makes a significant sense to improvement of mainland China’s capital market.This paper adopted a method of case study. Alibaba applied for being listed in Hong Kong Exchange in 2013, and successfully make its IPO in New York Stock Exchange in 2014. The first part of the paper contains an introduction of events that occurred in between and an introduction of Alibaba Partnership. In the next part, the author analyzed essence, innovation, merit and demerit of Alibaba Partnership and revealed reasons why the regulators of United States’ s capital market admitted Alibaba Partnership based on relevant historical background.The study found that Alibaba Partnership is essentially a new form of dual-class ownership structures. Both of them belong to a same kind of control arrangement. Such control arrangement can help the company to achieve long-term development and motivate management to invest human capital that highly matched the company. However, such control arrangement may become controlling shareholders’ tool of seeking private benefits. In addition, it will disable supervision of market for corporate control and may violate the principle of fairness. The regulators admitted such defective control arrangement because there are perfect information disclosure system, mature institutional investors-based investors structure and effective securities class action in United States’ s capital market. The enlightenment for us is as follows. When the conditions are ripe, listed companies should be allowed to introduce control arrangement similar to Alibaba Partnership, so that mainland China’s capital market can realize multi-wins. Learning from United States’ s experiences, the author analyzed the defects of the mentioned supporting mechanism of mainland China’s capital market. Accordingly, the author put forward some proposals to create the conditions for related permission from three aspects, that is to improve the information disclosure system, to correct investors’ investment philosophy while improving the investors structure and to improve the securities class action.