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One-child policy and family firms in China

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  • Cao, Jerry
  • Cumming, Douglas
  • Wang, Xiaoming

Abstract

Family business plays important roles to fuel economic growth in China. Due to the one-child policy, family firms are increasingly facing human capital constraints for within-family succession. Having only one heir decreases the probability of continuing family management by over 3%, reduces the probability of adult children working in family firms by 14%, and significantly decreases founders' expectations of having young heirs for succession. Having fewer children negatively affects founder's expectation to go public, reduces family firm's reinvestment rate and R&D. Overall, the evidence suggests that the human capital constraints due to the one-child policy impose significant negative impacts on within-family succession. Dynastic management of family firms remains an important challenge for first-generation entrepreneurs in China.

Suggested Citation

  • Cao, Jerry & Cumming, Douglas & Wang, Xiaoming, 2015. "One-child policy and family firms in China," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 317-329.
    • Handle: RePEc:eee:corfin:v:33:y:2015:i:c:p:317-329
    DOI: 10.1016/j.jcorpfin.2015.01.005
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    References listed on IDEAS

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    More about this item

    Keywords

    One-child policy; Family firms; Control; Dynastic management; Succession;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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