Riding off into the Sunset: Dual-Class Structure in the Age of Unicorns Going Public

Prof. LIANG Hao
Associate Professor of Finance, Singapore Management University

Date: 05 April 2024 (Friday)
Time: 10:30 am to 12:00 pm
Venue: E22-G015
Host: Prof. Brenda Yang ZHANG, Associate Professor in Business Economics


The increasing adoption of dual-class shares (DCS)—an ownership structure that gives corporate insiders greater voting power than other shareholders—among 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.



Professor LIANG Hao is an associate professor of finance at Singapore Management University (SMU), where he also holds the BNP Paribas Fellowship and DBS Sustainability Fellowship. He is a research member of European Corporate Governance Institute (ECGI) and an extramural fellow of Tilburg University. His research interests include sustainable finance, impact investing, corporate finance and governance. He has published on prestigious academic journals including Journal of Finance, Journal of Financial Economics, Journal of International Business Studies, Management Science, Organization Science, and Journal of Business Venturing . He is also the Section Editor (Finance & Business Ethics) of Journal of Business Ethics, an Associate Editor of Management Science, Journal of Business Research, Asia-Pacific Journal of Financial Studies, and British Accounting Review, and on the editorial review board of Strategic Management Journal.

 All are welcome!