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Political connection and business transformation in family firms: Evidence from China

Delu Wang, Gang Ma, Xuefeng Song and Yun Liu

Journal of Family Business Strategy, 2016, vol. 7, issue 2, 117-130

Abstract: We investigate the impact of family ownership on core business transformation and the moderating role of political connections in this relation through a Probit model, conditional Logit model, and Heckman selection model with instrumental variable using data from Chinese listed companies covering 2001–2010. The results demonstrate that, compared with non-family firms, family firms are more likely to transform their core business, enter strongly correlative industries and non-regulated industries, and adopt a mergers and acquisitions (M&A) mode. Furthermore, compared with politically non-connected family firms, family firms with political connections are more likely to conduct business transformation and adopt M&A rather than an internal cultivation mode to realize transformation. In addition, political connections make family firms more likely to enter weakly correlative industries and increase their chances of entering government-regulated industries.

Keywords: Business transformation; Transformation mode; Family firm; Political connection; Ownership (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:fambus:v:7:y:2016:i:2:p:117-130