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Founders and the decision of Chinese dual-class IPOs in the U.S

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  • Li, Xiaodan
  • Jiao, Yang
  • Yu, Min-Teh
  • Zhao, Yang

Abstract

This study collects data on IPOs of U.S.-listed Chinese companies from 2000 to 2015 and explores why some of these firms deviate from the one share-one vote regime when going public. Our results identify “founder's influence” and “e-businesses” as two key determinants of dual-class IPOs that have not been found in the previous literature. The significance of the effect of fundraising for long-term investments as found in the literature and this study disappears when comparing these two new determinants together. We also provide empirical evidence that managers adopt a dual-class share structure in order to retain control and to diversify the risk of their own wealth, and that there is no significant performance difference between dual-class firms and single-class firms after IPOs.

Suggested Citation

  • Li, Xiaodan & Jiao, Yang & Yu, Min-Teh & Zhao, Yang, 2019. "Founders and the decision of Chinese dual-class IPOs in the U.S," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:pacfin:v:57:y:2019:i:c:s0927538x1830088x
    DOI: 10.1016/j.pacfin.2018.04.009
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    More about this item

    Keywords

    Dual-class shares; Founder; U.S.-listed Chinese companies; IPO;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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