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

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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)

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    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.

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    Bibliographic Info

    Article provided by MDPI, Open Access Journal in its journal International Journal of Financial Studies.

    Volume (Year): 2 (2014)
    Issue (Month): 1 (February)
    Pages: 103-121

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    Handle: RePEc:gam:jijfss:v:2:y:2014:i:1:p:103-121:d:33548

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    Related research

    Keywords: China; corporate value; family concentrated ownership; family firms; ultimate ownership structure;

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