Dual-Class Firms: Evidence from IPOs of Chinese Firms Cross-Listed on US Exchanges

Abdullah, Zhou Jia'nan and Muhammad Hashim Shah

Emerging Markets Finance and Trade, 2017, vol. 53, issue 7, 1691-1704

Abstract: We compare Chinese single with dual-class firms cross-listed on US exchanges. We find that dual-class firms are larger in terms of assets and sales, possess ownership concentration, and have higher institutional ownership. Chinese firms in IT industry are especially likely to use dual-class structure. We find that, contrary to the literature, dual-class firms underprice 30.42% more and firm underprices less when governance practices are adequate. Insiders need to bear underpricing cost for retaining control. Interestingly, we find that dual-class firms hire more independent directors to show commitment toward shareholder’s rights but control them through CEO Chairman Duality and superior voting rights.

Date: 2017
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DOI: 10.1080/1540496X.2017.1307103

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