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Is It Feasible to Adopt Dual-Class Share Structure in A-Share Market? An Analysis Based on Trading Space and Trading Markets

【Authors】
HUA Sheng, LIN Hui, LU Yao & ZHONG Teng
【WorkUnit】
HUA Sheng (Southeast University, 211189)LIN Hui, LU Yao (Wuhan University, 430072)ZHONG Teng (University of International Business and Economics, 100029)
【Abstract】

First, the paper explains from the utility point of view that dual-class shares may bring benefits to both parties. Further, it gives a clear geometric interpretation of the dual-class share structure from the perspective of trading space. As to the applicability of dual-class shares in the A-share market, it constructs a model from the perspective of trading markets and finds that the reform would significantly strengthen the competitiveness of Shanghai and Shenzhen stock markets. But when considering the regulatory price under the special structure of the Shanghai and Shenzhen stock markets, there would be adverse selection with implicit risks. Therefore, this paper proposes to set a higher entry threshold for dual-class-share companies to be listed, and confine it to a relatively small group dominated by the new-economy firms. This will be conducive to protecting investors and enhancing the competitiveness of the Shanghai and Shenzhen stock markets.

JEL:G34, C59, D02

【KeyWords】
Dual-Class Share, New Economy, Institutional Innovation, Trading Space, Trading Market