scholarly journals Family Control, Political Connection, and Corporate Green Governance

2020 ◽  
Vol 12 (17) ◽  
pp. 7068
Author(s):  
Xiaolin Li ◽  
Weian Li ◽  
Yaowei Zhang
Keyword(s):  
Family Firms ◽  
Chinese Family ◽  
The Political ◽  
Political Connection ◽  
Social Emotional ◽  
Family Control ◽  
Listed Firms ◽  
Individual Level ◽  
Green Governance ◽  
Governance Practice

This paper firstly introduces green governance into the empirical research of family firms. Due to the fact that family firms have their own particularity in the principal agent and also have a strong desire to preserve social emotional wealth, this paper deeply studies the driving influence of family control on the green governance of family firms, and analyzes the moderating effect based on the political connection of executives. Taking the 2015–2017 Chinese family-listed firms that released social responsibility reports as the research sample, we find that family control contributes to the improvement of corporate green governance in family firms. However, the political connection of the actual controller weakens the effect of family control on the green governance of family firms. In addition, this research is also carried out under different situations, such as at the regional level and individual level. The research helps family firms give full play to their own advantages, guide the green governance practice of family firms, and improve the level of green governance.

scholarly journals Compliance management in family firms: A systematic literature analysis

2019 ◽  
Vol 17 (1) ◽  
pp. 140-157
Author(s):  
Behringer Stefan ◽  
Ulrich Patrick ◽  
Unruh Anjuli
Keyword(s):  
Family Firms ◽  
Dissemination And Implementation ◽  
Entrepreneurial Firms ◽  
Firm Level ◽  
Family Control ◽  
Compliance Management ◽  
Individual Level ◽  
Economic Role ◽  
Family Enterprises ◽  
Corporate Governance Codes

Family firms play an important economic role in Europe and in the world. The discussion of compliance-relevant issues has long been attributed to capital market-oriented large companies. So far, there have been few findings on the perception, dissemination and implementation of this concept in family businesses. The purpose of this paper is to provide a systematic and iterative literature review of available research on compliance management and corruption in family firms. Thereby a total of 47 articles on the topic were identified. The review acknowledged that Compliance/Corruption is a research topic but not often in the context of family firms. The literature of family enterprises dealt with the influence of family ownership on firms’ non-compliance with corporate governance codes out of the socio-emotional wealth perspective or examined the relationship between family control and young entrepreneurial firms’ bribing behaviour around the globe. Another perspective offers the literature about the agency and stewardship theories and their influence on family firms. Agency and stewardship governance affects individual-level behaviour and firm-level performance in a distinct and combined way. In the business ethics literature a few interesting papers were found, that consider unethical work behaviour or corrupt acts in the context of organizations and family firms. In addition, the analysis of the publications demonstrates the importance of compliance management in all types of companies/SMEs and shows that companies which have integrated compliance management gain a competitive advantage over their competitors. We come to the conclusion that additional empirical research on compliance and corruption in family firms is needed.

scholarly journals Family Control And The Value Of Cash Holdings

2015 ◽  
Vol 31 (2) ◽  
pp. 647 ◽  
Author(s):  
Sabri Boubaker ◽  
Imen Derouiche ◽  
Majdi Hassen
Keyword(s):  
Firm Value ◽  
Family Firms ◽  
Cash Holdings ◽  
Firm Resources ◽  
Family Control ◽  
Large Sample ◽  
Listed Firms ◽  
Excess Cash ◽  
Cash Reserves ◽  
Corporate Cash Holdings

The present study investigates the effects of family control on the value of corporate cash holdings. Using a large sample of French listed firms, the results show that the value of excess cash reserves is lower in family firms than in other firms, reflecting investors concern about the potential misuse of cash by controlling families. We also find that the value of excess cash is lower when controlling families are involved in management and when they maintain a grip on control, indicating that investors do not expect the efficient use of cash in these firms. Our findings are consistent with the argument that the extent to which excess cash contributes to firm value is lower when dominant shareholders are likely to expropriate firm resources. Overall, family control seems to be a key determinant of cash valuation when ownership is concentrated.

scholarly journals Do Political Connections Affect the Conservative Financial Reporting of Family Firms?

2019 ◽  
Vol 11 (20) ◽  
pp. 5563
Author(s):  
Hsin-Yi Chi ◽  
Tzu-Ching Weng ◽  
Guang-Zheng Chen ◽  
Shu-Ping Chen
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Political Connections ◽  
Policy Makers ◽  
Listed Firms ◽  
Reporting Incentives ◽  
Final Sample ◽  
The Family ◽  
Governance Practice ◽  
Using Data

This paper investigates the effect of political connections on the association between family firms and conservative financial reporting. While family firms have incentives to reduce agency and litigation-related costs by means of conservative reporting, firms with political connections tend to have opaque financial reporting, which enable them to engage in rent-seeking activities. Using data for Taiwanese listed firms between 1996 and 2012, the final sample observations were 13,877 firm-year observations from a population of 21,393 firm-year observations. We found that political connections weaken the positive relationship between family ownership and conservative financial reporting. This suggests that politically connected family firms make fewer demands for conservative financial reporting. This study contributes to the literature on how political connections affect the family owners’ reporting incentives. Policy makers may consider political connections as an essential factor with respect to establishing governance practice in family firms.

Do family CEOs benefit investment efficiency when they face uncertainty?

2017 ◽  
Vol 11 (2) ◽  
pp. 248-269 ◽  
Author(s):  
Weiwei Gao ◽  
Wanli Li ◽  
Zhen Huang
Keyword(s):  
Ownership Structure ◽  
Family Firms ◽  
Generation Effect ◽  
Chinese Family ◽  
Family Ownership ◽  
Investment Efficiency ◽  
Content Type ◽  
Family Control ◽  
Large Shareholder ◽  
Shareholder Structure

Purpose This paper aims to investigate whether family CEOs benefit investment efficiency under uncertainty with Chinese family firms and to test the moderating effect of ownership structure, including family ownership, the separation of family control from family ownership and the multiple large shareholder structure. Design/methodology/approach Fixed-effects models are designed for a sample of 5,734 firm-year observations for Chinese family firms from 2009 to 2014. Findings The results show that investment efficiency is low under uncertainty, and having family CEOs can reduce this negative relationship. Further analysis reveals that for firms with family CEOs, the negative effect of uncertainty on investment efficiency is weaker when the family has higher ownership, when family control is less separated from family ownership, or when family firms have multiple large shareholder structures. Research limitations/implications The authors do not distinguish founder-CEOs and descendant-CEOs. Most of Chinese family firms are still managed by founders, so the authors cannot explore the generation effect although different generations manage firms differently. Because family succession is becoming a more and more important problem in China, further research may be able to explore the generation effect. Practical/implications This paper suggests that in emerging economies with weak investor protection, outside minority shareholders can avoid expropriation from family owners by investing in firms with large family ownership, little separation of family control from ownership or multiple large shareholder structure. In addition, policymakers can encourage institutional investors to participate in family business to improve corporate governance. Originality/value Drawing on both Type I and Type II agency theory perspectives, the authors argue that although family CEOs can generally benefit firms’ investment efficiency, the benefits vary with firms’ ownership structure. In other words, family CEOs are not absolute agents or stewards but some extent of combination of both.

CEO pay and family firm heterogeneity: A behavioral agency model perspective

2021 ◽  
pp. 234094442110517
Author(s):  
Carlos Fernández Méndez ◽  
Rubén Arrondo García ◽  
Shams Pathan
Keyword(s):  
Family Firms ◽  
Firm Heterogeneity ◽  
Jel Classification ◽  
Agency Model ◽  
Family Control ◽  
Listed Firms ◽  
Top Executives ◽  
Pay Disparity ◽  
Ceo Pay ◽  
Behavioral Agency

We study the effects of family control on CEO pay from the perspective of behavioral agency model (BAM), with particular focus on family firm’s generational stage and CEO family ties. Using a panel of Australian listed firms, we find that family firms present lower total and variable CEO pay, showing also less pay disparity between the CEO and other top executives. We also find that multi-generational family firms and those run by non-family CEOs offer higher total and variable CEO pay and present high pay disparity. The BAM and family’s aversion to socioemotional wealth loss can explain the effects of family control based on the pursuing of non-financial family goals. The decline of these goals derived from the aging of the firm and the hiring of external CEOs shape family control and should be considered in the design of executive compensation policies and by external parties when assessing their suitability. JEL CLASSIFICATION: G30; G32; G34; G38

scholarly journals Do family firms pay less for external funding?

2021 ◽  
pp. 031289622110182
Author(s):  
Muhammad Jahangir Ali ◽  
Seema Miglani ◽  
Man Dang ◽  
Premkanth Puwanenthiren ◽  
Mazur Mieszko
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Jel Classification ◽  
Family Control ◽  
Listed Firms ◽  
Family Enterprises ◽  
The Cost ◽  
And Control ◽  
The Impact

We examine the impact of family control on the cost of raising external funds by family enterprises. Using a sample of Australian publicly listed firms, we find a significantly negative relation between cost of newly raised capital and family control. Moreover, we show that this relationship varies with the quality of corporate governance and the quality of firm’s information environment. Furthermore, we conduct several robustness checks and consistently find that our main results remain unchanged. Overall, our evidence suggests that family firms have easier access to external financing fostered by family involvement in the ownership and control. JEL Classification: G31; G32; M41; M42

scholarly journals Impact of financial crisis and family control on earning management of Portuguese listed firms

2017 ◽  
Vol 6 (2) ◽  
Author(s):  
Inês Lisboa
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Family Firms ◽  
Management Strategies ◽  
Negative Relationship ◽  
Earning Management ◽  
Family Control ◽  
Listed Firms ◽  
The Family ◽  
The Impact

Accounting information is used to evaluate the firm's financial performance. Although, firms may have incentives to engage in earnings management, misleading all stakeholders. This study aims to analyse earnings management behaviours of Portuguese listed firms. Both accrual-based and real activities of earnings management are analysed to draw an overall picture of earnings management’ strategies. Most studies focused only in discretionary accruals as a proxy for earnings management, since cash flow-based earnings management is more difficult to detect. Although both strategies can be complementary instead of substituting. Moreover, the impact of financial crisis, family control, and firm characteristics is taken into account. Previous literature found that 2008 crisis had impact on earnings management as firms want to meet debt covenants and investors’ expectations. Moreover, family firms also impact the magnitude of earnings management. While some researchers found a negative relationship since managers are highly controlled, others found the opposite relationship because the family may want to maximize their own wealth. Analysing 51 listed firms, from 2003 till 2015, results show that firms engage more in earnings management during crisis, when the firm's financial situation is less stable. In addition, accrual-based earnings management is higher in family firms than in non-family ones, suggesting less quality of information in the first group. Due to less control of family firms, the family may expropriate minority investors’ wealth to increase personal benefits. Finally, the impact of firms’ characteristics on earnings management depends on the proxy of earning management analysed, suggesting that firms use accrual or real-activities earnings management depending on its purposes.

scholarly journals Political connections and accounting conservatism: Evidence from Chinese listed firms

2017 ◽  
Vol 15 (1) ◽  
pp. 143-154
Author(s):  
Byungcherl Charlie Sohn ◽  
Ling Zhou
Keyword(s):  
Financial Reporting ◽  
Local Governments ◽  
Economic Importance ◽  
Accounting Conservatism ◽  
Political Connections ◽  
Institutional Setting ◽  
The Political ◽  
Political Connection ◽  
Listed Firms ◽  
Political Background

This study investigates the effect of political connections on accounting conservatism for Chinese firms. Using the Chinese non-state-owned listed companies for the period 2008-2013, we find that the relation between political connections and accounting conservatism is insignificant because political connections may impair accounting conservatism on one aspect but also may strengthen accounting conservatism on the other aspect. This research contributes to the literature on the effect of political connections on firms’ various business activities by focusing on firms’ conservatism level of financial reporting using a unique institutional setting in China. Considering the importance of political background in transition economies like China, it is an important question whether political connections affect accounting conservatism. Our research method differs in that we measure the political connections directly using firms’ CEO or board chairman’s political background, while most prior studies measure them indirectly using firms’ donations to political elections or firms’ economic importance to the local governments. Our direct measure reduces noise in the political connection variable and allows us to more accurately investigate the effect of politically connected managers, not the effect of politically important entities, on firms’ accounting conservatism.

scholarly journals Do Managers In Chinese Family Firms Learn From The Market? Evidence From Chinese Private Placement

2015 ◽  
Vol 31 (2) ◽  
pp. 471 ◽  
Author(s):  
Wanli Li ◽  
Weiwei Gao ◽  
Wei Sun
Keyword(s):  
Corporate Governance ◽  
Family Involvement ◽  
Family Firms ◽  
Independent Directors ◽  
Chinese Family ◽  
Family Control ◽  
Financing Decisions ◽  
Private Placement ◽  
Top Managers ◽  
Private Placements

Recent empirical papers report managers learning in merger and acquisition (M&A) decisions and family control is central in many countries. Does learning exist in family firms financing decisions? Based on the announced private placements from Chinese family firms, we investigate the relation between managers final decisions in family firms and the market reaction to the announcement. Our analysis suggests that a non-linear relation exists between managers learning and family control. Managers generally learn from the market when making final decisions but family involvement can reduce this probability. Supplementary testing indicates that managers in family firms with low ownership are less likely to learn from the market than those in family firms with high ownership. Further analysis suggests that corporate governance can influence managers learning. Family member participation in purchasing the placed shares and serve as the top managers can make manager learning less likely when the ownership is low. Independent directors in family firms dont play their due role in supervising the behavior of managers and large shareholders.

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