ÖйúÒ»¼¶Æ¬

The increasing adoption of dual-class shares (DCS)¡ªan ownership structure that gives corporate insiders greater voting power than other shareholders¡ªamong newly listed companies has raised significant governance concerns. We investigate the decision to adopt the DCS structure and its value implications in the recent U.S. IPOs. Using founder cultural traits and Silicon Valley law firms as instrumental variables, we find significant post-IPO outperformance by firms adopting DCS with sunset clauses, especially those stipulating the termination of DCS after founders¡¯ incapacitation, compared to non-DCS firms and DCS firms without sunsets. This outperformance is more pronounced in firms for which technology is more crucial, and is related to greater operating efficiency and innovation outputs. However, sunset adoption reduces executives¡¯ risk-taking incentives, leading to lower innovation quality. In an event study around Hong Kong¡¯s regulatory reform allowing DCS listings with compulsory incapacity-based sunset clauses, we confirm that DCS-cum-sunset creates the most value for investors.

zcarol2@ceibs.edu