Study On The Motivation And Governance Effects Of Implementing Dual-Class Share Structure In Science And Innovative Enterprises

In recent years,China’s science and technology innovative enterprises have developed at a very fast pace.Such enterprises tend to attach great importance to R&D innovation and invest heavily in R&D,and therefore have a great need for external financing to meet their R&D needs.However,the traditional equity structure with the same shareholding can easily lead to dilution of the founder’s shareholding,loss of control over the company and even malicious takeover of some companies.The advantage of a dual shareholding structure is that it can ensure that the founders remain in control of the company and prevent a hostile takeover,while reducing the short-sightedness of external investors and facilitating the long-term development of the company.2019 saw the experimentation of a dual shareholding system on the STB.As the dual-equity structure has been implemented in the KCI Board for a relatively short period of time,there are not many actual cases and the capital market in Chinese mainland still does not have a mature evaluation mechanism to assess the effect of the adoption of dual-equity structure by enterprises,it is therefore very meaningful to conduct case studies on listed companies with dual-equity structure.On the one hand,it can theoretically enrich the case studies of Chinese scholars in respect of dual shareholding structures.On the other hand,it can serve as a reference for other companies that wish to list on the STB and adopt a dual shareholding structure.In this paper,Huiyu Pharmaceutical is selected as a case study.Firstly,the literature on the evaluation of dual shareholding structure and corporate governance effects at home and abroad is summarised and summarised through the literature research method.Secondly,this paper identifies the concepts of dual shareholding structure,corporate governance and science-based enterprises,and analyses the impact mechanism of dual shareholding structure on corporate governance in the context of principal-agent theory,shareholding structure theory,information asymmetry theory,separation of powers theory and control theory.Again,this paper introduces the specific situation of Huiyu Pharmaceutical and the institutional arrangement of adopting dual shareholding structure,and makes a vertical comparison of the impact of adopting dual shareholding structure on Huiyu Pharmaceutical’s corporate governance based on the situation before and after Huiyu Pharmaceutical’s adoption of dual shareholding structure.Subsequently,the paper selects Yi Pin Hong Pharmaceuticals as a control company and analyses the impact of the dual shareholding structure on Huiyu Pharmaceuticals’ financial performance through a horizontal comparison analysis and a vertical comparison.Finally,the conclusions of this paper are drawn and recommendations are made for the implementation of a dual shareholding structure system on the KCI based on this case.The findings of this paper are as follows: Huiyu Pharma’s choice of a dual equity structure was motivated by the following: firstly,improving the competitiveness of the industry;secondly,to expand the scale of financing while reducing interest expenses;thirdly,to maintain the advantage of human capital and maintain stable corporate development;and fourthly,to satisfy the need for heterogeneity of shareholders.Huiyu Pharmaceutical’s implementation of a dual shareholding structure has had certain positive effects on corporate governance.Firstly,the board structure has been optimised.Secondly,the dual shareholding structure ensures the control of the founders,which is conducive to the stability of shareholding and also protects the rights and interests of minority shareholders as far as possible.Thirdly,Huiyu Pharma’s agency costs have been reduced following the switch to a dual shareholding structure.Finally,the quality of information disclosed by Huiyu Pharmaceuticals is also relatively high.In terms of financial performance,except for poor profitability,solvency,growth and innovation capabilities performed well.The paper’s suggestions for improvement in implementing a dual shareholding structure include strengthening information disclosure,improving the system for protecting the interests of small and medium-sized shareholders and increasing the system of sunset clauses.