Family control and corporate risk-taking in China: Does working capital strategy matter?

Chai Bin-Feng, Sultan Sikandar Mirza, Tanveer Ahsan, Raheel Safdar, Amjad Iqbal and Mustansar Hayat

Economic Research-Ekonomska Istraživanja, 2022, vol. 35, issue 1, 4280-4299

Abstract: This study uses the data of A-share listed family firms during the period 2010-18 and employs multiple regression analysis to verify the role of family control and working capital strategy for corporate risk-taking in China. This study also explores the regulatory role of family control in the relationship between working capital strategy and corporate risk-taking of Chinese listed family firms. Results show that greater family control encourages risk-taking behavior in Chinese firms whereas conservative working capital strategy diminishes corporate risk-taking. The results also suggest a regulatory role for family control on the effects of working capital strategy for family firms’ risk-taking behavior. Strong family control weakens the negative association between working capital conservatism and corporate risk-taking. This study's findings may help managers of family firms to adjust risk-taking behavior in response to changing working capital strategy. The results are robust to different measures of corporate risk-taking and working capital strategy.

Date: 2022
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DOI: 10.1080/1331677X.2021.2013270

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