Does the dual-class share structure help stock markets attract issuers? Empirical lessons from global financial centres

Financial globalisation has given issuers more freedom to carry out jurisdiction shopping. As a policy response, a growing number of stock markets have introduced the dual-class share structure to enhance global competitiveness. However, does the dual-class share structure help stock markets attract issuers? It is a question rarely examined empirically in existing scholarly work. This paper explores the practices of three jurisdictions with global financial centres, ie the US, China and Hong Kong, to narrow the research gap. Based on hand-collected data, it explains the infrequent listings with the dual-class share structure in China and Hong Kong in the post-reform era in two ways: low demand due to the use of substitutes; and limited allowance caused by the harsh ex ante regulation, and is the first comparative quantitative study in this field. Drawing on the empirical lessons, this paper recommends that China relax its ex ante regulation and suggests the wider community consider the necessity of introducing the dual-class share structure and the balance they aim to achieve between investor protection and market openness.