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The Impact of Unique Corporate Governance Mechanisms on Corporate Innovation
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TitleThe Impact of Unique Corporate Governance Mechanisms on Corporate Innovation  
AuthorShi Xiaojun and Wang Aoran  
OrganizationSchool of Finance, Renmin University of China, Beijing 
Key WordsDual-class Structure; Innovation; Internet Firm; Corporate Governance 
AbstractDual-class Structure is increasingly used in emerging high-tech firms. Existing literature on this emerging corporate governance mechanism mainly focuses on principal-agent problems caused by it. While, its impact on innovation is rarely studied. This paper theoretically analyses this impact by introducing short-term performance sensitivity into Chemmanur-Jiao model and empirically tests the theoretical findings using the data of global public-listed Internet firms. This paper finds that, in the global picture, dual-class structure can significantly spur corporate innovation. This impact is more economically and statistically significant after solving the selection problems through Prospensity Score Method and Heckman Selection Model. This paper also finds that dual-class structure’s impact on innovation depends on the short-term performance sensitivity of outside investors, which is significantly different in emerging countries and developed countries. In emerging markets where external governance mechanisms are still underdeveloped, dual-class structure combined with founder CEO or chairman would impede innovation investment. Further evidence suggests that China has not prepared enough for introducing dual-class structure yet. 
Serial NumberWP1169 
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