Does It Take Four to Tango in the Regulatory Competition for Global Listings? Comparing Regulations on Dual Class Shares among Singapore, Hong Kong, Mainland China, and Taiwan

Abstract

We provide a comparative analysis of regulatory competition among Singapore, Hong Kong, Mainland China, and Taiwan regarding the process, purpose, and actual results of deregulating Dual-Class Share (“DCS”) structure. The comparative analysis focuses on the role of regulatory competition in the convergence or divergence of DCS-structure regulations. To attract unicorn companies and China Concept Stock (“CCS”) companies to choose public offerings in regional exchanges, Hong Kong, Singapore, and Mainland China sequentially announced their amendments to listing rules, particularly in 2018, to allow public offerings of DCS-structure companies while considering their preference for the ownership structure of unicorns. We employ theories of regulatory competition and convergence to analyze the regulatory trajectories of the four jurisdictions in the Asia-Pacific region and how such jurisdictional competition would accelerate the transplantation of corporate governance regulations and, therefore, converge with the US permissive model in appearance. Hong Kong, Singapore, and Mainland China have transplanted the DCS-structure listing regulatory framework and added shareholder protection, particular disclosure, and sunset restrictions, which converge more in concert with each other towards the US model. We also discuss why and how stubborn path dependence would bring non-convergence towards the US model for listing companies in Taiwan, which is an outlier of the regulatory competition for global listings. By analyzing this competition by supplying DCS legal products among the four jurisdictions, we enrich the regulatory competition theory and study how this competition produces formal convergence and functional divergence of DCS structures in corporate governance regulations. We contribute to the existing literature by providing a comparative view of regulatory competition among the four jurisdictions and examining the potential impact of the US-China trade war on the deregulation of the DCS structure in the Asia-Pacific region