Family-Concentrated Ownership in Chinese PLCs: Does Ownership Concentration Always Enhance Corporate Value?

Jin-Hui Luo and Heng Liu
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Jin-Hui Luo: Department of Accounting, School of Management, Xiamen University, No. 422 Siming South Road, Xiamen 361005, China
Heng Liu: Department of Business Administration, Lingnan College, SUN YAT-SEN University, Guangzhou 510275, China

IJFS, 2014, vol. 2, issue 1, 1-19

Abstract: In this paper we investigate the relationship between family ownership structure and corporate value across a sample of 1314 firm-year observations of China’s family publicly listed companies (PLCs), from 2004 to 2008. We find a significant inverse-U-shaped relationship between the controlling family’s ultimate cash-flow rights and corporate value; as measured by Tobin’s Q. That is, as family-ownership concentration increases, corporate value first increases and then decreases. This finding refreshes our understanding of the relationship between family-ownership concentration and corporate value in emerging economies such as found in China. We corroborate prior findings that when controlling families hold excess control over cash-flow rights, corporate value is significantly lowered, while multiple large shareholders structure is significantly associated with higher corporate value. In addition; board independence is found to significantly improve corporate value in the context of family-concentrated ownership. We also test for potential endogeneity between family ownership and corporate value and find our results to be robust.

Keywords: China; corporate value; family concentrated ownership; family firms; ultimate ownership structure (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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