Historical Ownership of Family Firms and Corporate Fraud

Xin Huang (), Wanrong Li (), Chen Cheng (), Hao Huang () and Guanchun Liu ()
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Xin Huang: Hunan University of Technology and Business
Wanrong Li: Beijing Normal University
Chen Cheng: Zhengzhou University
Hao Huang: Xi’an Jiaotong-Liverpool University
Guanchun Liu: Sun Yat-sen University

Journal of Business Ethics, 2025, vol. 198, issue 2, No 4, 293-319

Abstract: Abstract We examine the impact of family firms’ historical ownership on corporate fraud. Our results show that restructured family firms from state-owned enterprises are more likely to violate and commit more fraud than entrepreneurial family firms. This finding is robust to the difference-in-difference-in-differences estimation, an instrument variables regression, fixed effects research design, and propensity score matching (PSM) approach analysis. Mechanism analysis shows that restructured family firms result in lower financial performance, high labor redundancy, inefficient investments, and cash volatility. Therefore, restructured family firms have a stronger incentive to conceal these problems through corporate fraud. Furthermore, the effects of family firms’ historical ownership on corporate fraud are weakened for a more extended period after SOE ownership reform and the restructuring approach adopted by equity takeover.

Keywords: Historical ownership; Restructured family firm; Entrepreneurial family firm; Corporate fraud (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10551-024-05817-6

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