Family CEOs: Do they benefit firm performance in China?

Family firms throughout the world commonly appoint family members as CEOs. However, the value of family CEOs is a subject of ongoing debate. This study attempts to further illuminate the debate in two ways. First, we extend this debate to China, a new and underexplored context, where family business...

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Bibliographic Details
Published inAsia Pacific journal of management Vol. 29; no. 4; pp. 923 - 947
Main Authors Cai, Di, Luo, Jin-hui, Wan, Di-fang
Format Journal Article
LanguageEnglish
Published Boston Springer US 01.12.2012
Springer Nature B.V
Subjects
2004-2007
Agency theory
Aktiengesellschaft
Analysis
Business and Management
Chief executive officers
China
Economic growth
Emerging markets
Familienunternehmen
Family owned businesses
Führungskräfte
Management
Organization theory
Ownership
Prinzipal-Agent-Theorie
Stockholders
Studies
Unternehmenserfolg
China
Family firms
China
Institution-based view
Family CEOs
Principal–Principal (PP) perspective
Concentrated ownership
Agency theory
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ISSN0217-4561
1572-9958
DOI10.1007/s10490-012-9318-4

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Summary:Family firms throughout the world commonly appoint family members as CEOs. However, the value of family CEOs is a subject of ongoing debate. This study attempts to further illuminate the debate in two ways. First, we extend this debate to China, a new and underexplored context, where family businesses are relatively new but growing rapidly. Second, drawing on both principal–agent (PA) and principal–principal (PP) perspectives of agency theory and the institution-based view, we argue that family CEOs are overall, of positive value in China where formal institutions are weak, but this positive effect varies in relative strength across family firms that have different concentrated-ownership structures. Using a sample of 913 firm-year observations for 351 Chinese listed family companies from 2004 to 2007, we find that family CEOs, as a whole, are positively related to firm performance, as measured by both market-based and accounting-based performance, reflecting Tobin’s Q and ROA. Further analyses reveal a stronger positive effect in family firms when family owners have higher ownership, when family ownership and family control are less divergent, and when the firms have multiple-large-shareholder structures.
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ISSN:0217-4561
1572-9958
DOI:10.1007/s10490-012-9318-4