Dual-Class Share Structure and Enterprise Digitalization:Evidence from Chinese Enterprises Listed in the United States
In recent years,the digital economy has emerged as a major growth engine for China.More enterprises expected to enhance their core competitiveness through digital transformation.However,enterprise digitalization is a costly long-term project and highly depends on executives with digital expertise.In order to advance digital strategies,enterprises are supposed to hire executives with digital expertise and guarantee the intensity and stability of their power.Since the dual-class share structure can help core executives to maintain control over enterprises with relatively small equity shares,more and more enterprises choose to be listed with dual-class share structure.Therefore,the dual-class share structure can enhance and stabilize the power of executives with digital expertise,which has important theoretical and practical significance for promoting enterprises'digitalization level.Based on the sample of Chinese enterprises listed in the United States from 2009 to 2022,this paper examines the impact of dual-class share structure on enterprise digitalization.The study finds that the dual-class share structure can maintain the control rights of executives with digital expertise and significantly improve enterprises'digitalization level.The baseline conclusion is still valid after robustness tests and endogenous processing.The mechanism test shows that the increase of digital innovations and the alleviation of equity financing constraints are two important mechanisms for dual-class share structure to facilitate enterprise digitalization.Heterogeneity analysis indicates that the promotion effect of dual-class share structure on enterprise digitalization is more significant for the start-up enterprises,strategic emerging enterprises and enterprises with high market pressure.In addition,the regulatory environment is more stringent for enterprises with the Sunset Provision and more rigorous auditors,which alleviates the potential agency problems of dual-class share structure.The facilitating effect of dual-class share structure on enterprise digitalization is stronger in enterprises with stringent internal and external regulatory environment.The research is beneficial for optimizing China's dual-class share structure regimes and incentivizing enterprises to be digitalized.The government should optimize the dual-class share structure regimes to stimulate the creativity of executives with digital expertise,which is beneficial to cultivate competitive digital enterprises.Research innovations and contributions include the following aspects.First,this paper enriches the researches on enterprises'digitalization driving force from the perspective of equity structure.Since the dual-class share structure will enhance the power intensity and stability of core executives,this research investigated the impact of dual-class share structure on executives'motivation to formulate digitalization strategies.The study fills the research gap of dual-class share structure on enterprise digitalization.Second,the mechanism and heterogeneous impact of dual-class share structure on enterprise digitalization is explored.From the perspective of digital innovation and equity financing capability,this paper empirically discusses the mechanism of dual-class share structure on enterprise digitalization.Considering enterprises with different life cycle,industry and market pressure characteristics,this research also reveals the heterogeneous impact of dual-class share structure on enterprise digitalization.The analyses provide empirical evidence to optimize the access rules of dual-class share structure regimes,and improve enterprises'digitalization level.Third,the supporting measures to alleviate the agency problem of dual-class share structure are explored.For strengthening the impact of dual-class share structure on enterprise digitalization,this study discussed the synergies between internal supervision,external supervision and the dual-class share structure.The findings provide policy reference for China to optimize the supervision system of dual-class share structure.
dual-class share structureexecutives with digital expertiseenterprise digitalization
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