Problems In The Dual-class Share Structure Of The JD And Its Improvement Measures

The uncoordinated contradiction between equity financing and maintaining corporate control made the appearance of dual-class share structure possible,which helps founders maintain or strengthen the corporate control by issuing stocks with different voting rights.But the dual-class share structure has been controversial since its appearance and hasn’t been admitted by our country.However,so many companies such as BIDU、JD、Sina have chosen American stock exchanges to go public,which led that lots of excellent Internet enterprises run away from domestic capital market.So this special share structure does good or harm to company development is a hot topic in the field of corporate governance and one of the most important factors that a company may consider when choosing the share structure for IPO.In order to seek why the dual-class share structure is so popular among Internet companies and what effects it will bring about to their development,the author will use literature review method and case study method as the main study methods.At first,the author gathers the present study results and clears them up.Then the agent theory,stakeholder theory and information asymmetry theory are introduced to pave the way for next parts.Next,the author chooses JD—the first electronic commercial enterprise who went public in NASDAQ as the research object.Through its development situation and the fact that the founder’s control right was threatened,the motivation can be summarized.Then the specific design of the dual-class share is introduced to explain how Liu Qiangdong can enjoy 83.7%of the voting rights with only 23.1%shares of the company.Next,the author will choose the financial statements of 2011～2016 to analyze the financial situation before and after applying this structure.After comparison,the author finds the implementation of dual-class share structure helped Liu and his team maintain the control of JD and stick to its long-term strategies.The performance of JD also has been improving rapidly.However,the author also finds that too focusing on the construction of storage and logistic facilities become a heavy burden to its financial performance and kidnap for those minority shareholders.Meanwhile,it also increases the agent cost and weakens the internal supervision system,which can be potential risk during its future development.Therefore,the author puts forward some corresponding improvement measures in the hope of helping JD larger the advantages and decrease its disadvantages of the dual-class share structure.The innovation mainly aims at the author analyzes this case from the perspective of management and finance which breaks through the present situation that most of studies are done from legislation layer.After such analysis above,the author mainly comes to these conclusions.First,the implementation of dual-class share structure helps JD maintain its control and long-term strategies which brings about rapid development.But it also causes many problems,such as increasing the agent cost,making the internal supervision useless and infringing the interests of minority shareholders.So the special share structure is a double-edged sword.Second,in modern market economy where the differences of shareholders become more evident,enough space should be reserved for the appliance of the dual-class share structure in the future.Third,the market economic system isn’t perfect yet,the governance should establish compulsory information disclosure system in order to balance the information asymmetry between internal managers and outside investors and protect the interests of minority shareholders.