| Abstract: |
The adoption of dual-class shares (DCS) in recent U.S. IPOs, particularly among technology-focused unicorns, has raised significant governance concerns due to the disproportionate voting power granted to corporate insiders. In response, some firms implement sunset clauses to limit the duration of DCS. This study examines the implications of DCS adoption, especially with sunset clauses, on firm performance post-IPO. By using founder cultural traits and the influence of Silicon Valley law firms as instrumental variables for DCS and sunset clause adoption, respectively, our analysis reveals that firms with DCS and sunset clauses—particularly incapacity-based sunsets—significantly outperform their counterparts. This outperformance is more pronounced in technology-intensive firms and is attributed to enhanced operating efficiency and innovation output. However, sunset clauses are associated with reduced executives’ risk-taking incentives, which can impact innovation quality. Our event study on Hong Kong’s regulatory reforms further supports that DCS with mandatory incapacity-based sunset clauses maximize value for investors.
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Biography:
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LDr. Hao Liang is an Associate Professor of Finance, the Co-Director of the Singapore Green Finance Centre, and the Co-Lead of the Sustainable Business Research Peak at Singapore Management University (SMU). He holds the Ho Bee Professorship in Sustainability Management and has been awarded the BNP Paribas Fellowship, DBS Sustainability Fellowship, and Lee Kong Chian Fellowship. He is a research member of the European Corporate Governance Institute (ECGI) and an extramural fellow at Tilburg University, where he received his PhD in Finance and won the university-wide Best Dissertation Award in 2015. Additionally, he serves on the Steering Committee of the Impact & Sustainable Finance Faculty Consortium, the Scientific Committee of the Geneva Centre for Philanthropy, the Technical Committee for Sustainable Finance of Enterprise Singapore, and has been nominated to the China ESG 30 Forum by Caixin Magazine.
Dr. Liang's research interests include sustainable finance, impact investing, corporate finance, and governance. He has published in prestigious academic journals, such as the Journal of Finance, Journal of Financial Economics, Review of Finance, Journal of International Business Studies, Management Science, Organization Science, and Journal of Business Venturing. He is the Section Editor (Finance & Business Ethics) for the Journal of Business Ethics, an Associate Editor for Management Science, Journal of Business Research, Asia-Pacific Journal of Financial Studies, and British Accounting Review, and serves on the editorial review board of the Strategic Management Journal.
Professor Liang received the Alliance for Research on Corporate Sustainability Emerging Scholar Award in 2020 and has twice won the prestigious Moskowitz Prize for Socially Responsible Investing (2014 & 2019). At SMU, he teaches Sustainable Finance, Entrepreneurial Finance, Corporate Finance, and Applied Econometrics at the undergraduate, master’s, DBA, executive, and PhD levels. He frequently contributes to the Harvard Law School Forum on Corporate Governance and the Oxford Business Law Blog, among other media outlets.
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