IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v123y2014i2p183-195.html
   My bibliography  Save this article

Family Ownership and Corporate Misconduct in U.S. Small Firms

Author

Listed:
  • Shujun Ding
  • Zhenyu Wu

Abstract

This study adds to the theory of family business management by exploring the effects of family ownership on the corporate misconduct of small firms in the United States. The empirical findings indicate that small family-owned firms are less likely to commit misconduct than small non-family-owned firms. We interpret this finding as family firms aiming to achieve the trans-generational succession of moral capital. Further investigation shows a nonlinear family-ownership–misconduct relationship. A negative relationship between them only appears in mature firms. We further show that for relatively mature firms, only family firms with older owners are less likely to commit corporate misconduct. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Shujun Ding & Zhenyu Wu, 2014. "Family Ownership and Corporate Misconduct in U.S. Small Firms," Journal of Business Ethics, Springer, vol. 123(2), pages 183-195, August.
    • Handle: RePEc:kap:jbuset:v:123:y:2014:i:2:p:183-195
    DOI: 10.1007/s10551-013-1812-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10551-013-1812-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-013-1812-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Aldrich, Howard E. & Cliff, Jennifer E., 2003. "The pervasive effects of family on entrepreneurship: toward a family embeddedness perspective," Journal of Business Venturing, Elsevier, vol. 18(5), pages 573-596, September.
    2. Louis Amato & Christie Amato, 2007. "The Effects of Firm Size and Industry on Corporate Giving," Journal of Business Ethics, Springer, vol. 72(3), pages 229-241, May.
    3. Chunxin Jia & Shujun Ding & Yuanshun Li & Zhenyu Wu, 2009. "Fraud, Enforcement Action, and the Role of Corporate Governance: Evidence from China," Journal of Business Ethics, Springer, vol. 90(4), pages 561-576, December.
    4. Shujun Ding & Chunxin Jia & Yuanshun Li & Zhenyu Wu, 2010. "Reactivity and Passivity After Enforcement Actions: Better Late Than Never," Journal of Business Ethics, Springer, vol. 95(2), pages 337-359, September.
    5. Harvey James, 1999. "Owner as Manager, Extended Horizons and the Family Firm," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(1), pages 41-55.
    6. Villalonga, Belen & Amit, Raphael, 2006. "How do family ownership, control and management affect firm value?," Journal of Financial Economics, Elsevier, vol. 80(2), pages 385-417, May.
    7. Jan Lepoutre & Aimé Heene, 2006. "Investigating the Impact of Firm Size on Small Business Social Responsibility: A Critical Review," Journal of Business Ethics, Springer, vol. 67(3), pages 257-273, September.
    8. Everett, Jeff & Neu, Dean & Rahaman, Abu Shiraz, 2007. "Accounting and the global fight against corruption," Accounting, Organizations and Society, Elsevier, vol. 32(6), pages 513-542, August.
    9. Michael Fritsch & Pamela Mueller & Antje Weyh, 2005. "Direct and indirect effects of new business formation on regional employment," Applied Economics Letters, Taylor & Francis Journals, vol. 12(9), pages 545-548.
    10. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    11. Wu, Zhenyu & Chua, Jess H. & Chrisman, James J., 2007. "Effects of family ownership and management on small business equity financing," Journal of Business Venturing, Elsevier, vol. 22(6), pages 875-895, November.
    12. Vos, Ed & Yeh, Andy Jia-Yuh & Carter, Sara & Tagg, Stephen, 2007. "The happy story of small business financing," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2648-2672, September.
    13. Long, Rebecca G. & Mathews, K. Michael, 2011. "Ethics in the Family Firm: Cohesion through Reciprocity and Exchange," Business Ethics Quarterly, Cambridge University Press, vol. 21(2), pages 287-308, April.
    14. Sharma, Pramodita & Sharma, Sanjay, 2011. "Drivers of Proactive Environmental Strategy in Family Firms," Business Ethics Quarterly, Cambridge University Press, vol. 21(2), pages 309-334, April.
    15. Morris, Michael H. & Williams, Roy O. & Allen, Jeffrey A. & Avila, Ramon A., 1997. "Correlates of success in family business transitions," Journal of Business Venturing, Elsevier, vol. 12(5), pages 385-401, September.
    16. Anderson, Ronald C. & Mansi, Sattar A. & Reeb, David M., 2003. "Founding family ownership and the agency cost of debt," Journal of Financial Economics, Elsevier, vol. 68(2), pages 263-285, May.
    17. Wennberg, Karl & Wiklund, Johan & Hellerstedt, Karin & Nordqvist, Mattias, 2011. "Implications of Intra-Family and External Ownership Transfer Of Family Firms: Short Term and Long Term Performance," Ratio Working Papers 172, The Ratio Institute.
    18. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 407-443.
    19. Erick P.C. Chang & James J. Chrisman & Jess H. Chua & Franz W. Kellermanns, 2008. "Regional Economy as a Determinant of the Prevalence of Family Firms in the United States: A Preliminary Report," Entrepreneurship Theory and Practice, , vol. 32(3), pages 559-573, May.
    20. Michael Fritsch & Pamela Mueller, 2004. "Effects of New Business Formation on Regional Development over Time," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 961-975.
    21. Marshall, James P. & Sorenson, Ritch & Brigham, Keith & Wieling, Elizabeth & Reifman, Alan & Wampler, Richard S., 2006. "The paradox for the family firm CEO: Owner age relationship to succession-related processes and plans," Journal of Business Venturing, Elsevier, vol. 21(3), pages 348-368, May.
    22. Neil C. Churchill & Kenneth J. Hatten, 1987. "Non-Market-Based Transfers of Wealth and Power: A Research Framework for Family Businesses," Entrepreneurship Theory and Practice, , vol. 12(2), pages 53-66, October.
    23. Besser, Terry L. & Miller, Nancy, 2001. "Is the good corporation dead? the community social responsibility of small business operators," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(3), pages 221-241, May.
    24. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, April.
    25. Yahya Wijaya, 2008. "The Prospect of Familism in the Global Era: A Study on the Recent Development of the Ethnic-Chinese Business, with Particular Attention to the Indonesian Context," Journal of Business Ethics, Springer, vol. 79(3), pages 311-317, May.
    26. Cumming, Douglas & Zambelli, Simona, 2010. "Illegal buyouts," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 441-456, February.
    27. Chen, Gongmeng & Firth, Michael & Gao, Daniel N. & Rui, Oliver M., 2006. "Ownership structure, corporate governance, and fraud: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 424-448, June.
    28. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    29. Pramodita Sharma & James J. Chrisman & Amy L. Pablo & Jess H. Chua, 2001. "Determinants of Initial Satisfaction with the Succession Process in Family Firms: A Conceptual Model," Entrepreneurship Theory and Practice, , vol. 25(3), pages 17-36, April.
    30. Douglas Cumming & Grant Fleming & Sofia Johan & Mai Takeuchi, 2010. "Legal Protection, Corruption and Private Equity Returns in Asia," Journal of Business Ethics, Springer, vol. 95(2), pages 173-193, September.
    31. Jean‐Luc Arregle & Michael A. Hitt & David G. Sirmon & Philippe Very, 2007. "The Development of Organizational Social Capital: Attributes of Family Firms," Journal of Management Studies, Wiley Blackwell, vol. 44(1), pages 73-95, January.
    32. Rebel A. Cole, 2013. "What Do We Know about the Capital Structure of Privately Held US Firms? Evidence from the Surveys of Small Business Finance," Financial Management, Financial Management Association International, vol. 42(4), pages 777-813, December.
    33. William S. Schulze & Michael H. Lubatkin & Richard N. Dino & Ann K. Buchholtz, 2001. "Agency Relationships in Family Firms: Theory and Evidence," Organization Science, INFORMS, vol. 12(2), pages 99-116, April.
    34. Pamela Murphy & M. Dacin, 2011. "Psychological Pathways to Fraud: Understanding and Preventing Fraud in Organizations," Journal of Business Ethics, Springer, vol. 101(4), pages 601-618, July.
    35. Michael Lubatkin & William S. Schulze & Richard N. Dino, 2002. "Altruism, Agency and the Competitiveness of Family Firms," Post-Print hal-02311705, HAL.
    36. Patricia M. Dechow & Richard G. Sloan & Amy P. Sweeney, 1996. "Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC," Contemporary Accounting Research, John Wiley & Sons, vol. 13(1), pages 1-36, March.
    37. Thomas M. Zellweger & Franz W. Kellermanns & James J. Chrisman & Jess H. Chua, 2012. "Family Control and Family Firm Valuation by Family CEOs: The Importance of Intentions for Transgenerational Control," Organization Science, INFORMS, vol. 23(3), pages 851-868, June.
    38. Cumming, Douglas & Schmidt, Daniel & Walz, Uwe, 2010. "Legality and venture capital governance around the world," Journal of Business Venturing, Elsevier, vol. 25(1), pages 54-72, January.
    39. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    40. Luis R. Gomez‐Mejia & Marianna Makri & Martin Larraza Kintana, 2010. "Diversification Decisions in Family‐Controlled Firms," Journal of Management Studies, Wiley Blackwell, vol. 47(2), pages 223-252, March.
    41. Jean-Luc Arrègle & Michael Hitt & David Sirmon & Philippe Véry, 2007. "The Development of Organizational Social Capital : Attributes of Family Firms," Post-Print hal-02312687, HAL.
    42. Neil C. Churchill & Kenneth J. Hatten, 1987. "Non-Market-Based Transfers of Wealth and Power: A Research Framework for Family Businesses," Entrepreneurship Theory and Practice, , vol. 11(3), pages 51-64, January.
    43. William S. Schulze & Michael H. Lubatkin & Richard N. Dino, 2002. "Altruism, agency, and the competitiveness of family firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 247-259.
    44. Zhenyu Wu & Jess H. Chua, 2012. "Second–Order Gender Effects: The Case of U.S. Small Business Borrowing Cost," Entrepreneurship Theory and Practice, , vol. 36(3), pages 443-463, May.
    45. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    46. C.-F. Wu, 2006. "The Study of the Relations among Ethical Considerations, Family Management and Organizational Performance in Corporate Governance," Journal of Business Ethics, Springer, vol. 68(2), pages 165-179, October.
    47. Chua, Jess H. & Chrisman, James J. & Kellermanns, Franz & Wu, Zhenyu, 2011. "Family involvement and new venture debt financing," Journal of Business Venturing, Elsevier, vol. 26(4), pages 472-488, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Changhong & Li, Jialong & Liu, Mingzhi & Wang, Yuan & Wu, Zhenyu, 2017. "Anti-misconduct policies, corporate governance and capital market responses: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 48(C), pages 47-60.
    2. Olivier Meier & Guillaume Schier, 2021. "CSR and Family CEO: The Moderating Role of CEO’s Age," Journal of Business Ethics, Springer, vol. 174(3), pages 595-612, December.
    3. Basco, Rodrigo, 2015. "Family business and regional development—A theoretical model of regional familiness," Journal of Family Business Strategy, Elsevier, vol. 6(4), pages 259-271.
    4. Stephen J. Smulowitz & Didier Cossin & Alfredo De Massis & Hongze (Abraham) Lu, 2023. "Wrongdoing in Publicly Listed Family- and Nonfamily-Owned Firms: A Behavioral Perspective," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1233-1264, July.
    5. Cole, Rebel & Sokolyk, Tatyana, 2016. "Who needs credit and who gets credit? Evidence from the surveys of small business finances," Journal of Financial Stability, Elsevier, vol. 24(C), pages 40-60.
    6. Kimberly A. Eddleston & Jay P. Mulki, 2021. "Differences in Family-Owned SMEs’ Ethical Behavior: A Mixed Gamble Perspective of Family Firm Tax Evasion," Entrepreneurship Theory and Practice, , vol. 45(4), pages 767-791, July.
    7. Zhu Zhu & Feifei Lu, 2020. "Family Ownership and Corporate Environmental Responsibility: The Contingent Effect of Venture Capital and Institutional Environment," JRFM, MDPI, vol. 13(6), pages 1-18, June.
    8. Felipe Hernández-Perlines & Manuel Alejandro Ibarra Cisneros, 2017. "Analysis of the moderating effect of entrepreneurial orientation on the influence of social responsibility on the performance of Mexican family companies," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1408209-140, January.
    9. Felipe Hernández-Perlines & Nina Rung-Hoch, 2017. "Sustainable Entrepreneurial Orientation in Family Firms," Sustainability, MDPI, vol. 9(7), pages 1-16, July.
    10. Michael A. Abebe & Keshab Acharya, 2022. "Founder CEOs and corporate environmental violations: Evidence from S&P 1500 firms," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1204-1219, March.
    11. Ziwei Wang & Chunfeng Wang & Zhenming Fang, 2023. "Common institutional ownership and corporate misconduct," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 102-136, January.
    12. Randerson, Kathleen, 2022. "Conceptualizing family business social responsibility," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    13. Nhat Minh Tran & Thu Thuy Nguyen & Thi Phuong Linh Nguyen & Anh Trong Vu & Thi Thanh Hoa Phan & Thi Hong Tham Nguyen & Ngoc Diep Do & Anh Tuan Phan, 2022. "Female Managers and Corruption in SMEs: A Comparison Between Family and Nonfamily SMEs in Vietnam," SAGE Open, , vol. 12(1), pages 21582440221, March.
    14. Md. Abdul Kaium Masud & Mohammad Nurunnabi & Seong Mi Bae, 2018. "The effects of corporate governance on environmental sustainability reporting: empirical evidence from South Asian countries," Asian Journal of Sustainability and Social Responsibility, Springer, vol. 3(1), pages 1-26, December.
    15. Haans, Richard F.J. & van den Oever, Koen, 2021. "Foreign entrepreneurs engage in less misconduct than native entrepreneurs: Evidence from U.K. director disqualifications," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    16. Liu, Fangyi, 2021. "Family business succession roadblock model based on fuzzy linguistic preference relations," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    17. Seong Mi Bae & Md. Abdul Kaium Masud & Jong Dae Kim, 2018. "A Cross-Country Investigation of Corporate Governance and Corporate Sustainability Disclosure: A Signaling Theory Perspective," Sustainability, MDPI, vol. 10(8), pages 1-16, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shujun Ding & Baozhi Qu & Zhenyu Wu, 2016. "Family Control, Socioemotional Wealth, and Governance Environment: The Case of Bribes," Journal of Business Ethics, Springer, vol. 136(3), pages 639-654, July.
    2. Chua, Jess H. & Chrisman, James J. & Kellermanns, Franz & Wu, Zhenyu, 2011. "Family involvement and new venture debt financing," Journal of Business Venturing, Elsevier, vol. 26(4), pages 472-488, July.
    3. Wright, Mike & Kellermanns, Franz W., 2011. "Family firms: A research agenda and publication guide," Journal of Family Business Strategy, Elsevier, vol. 2(4), pages 187-198.
    4. Zhou Xing & Yang Fan & Wu Zhenyu, 2012. "Family Involvement, Ethnicity, and Willingness to Borrow: Evidence from U.S. Small Firms," Entrepreneurship Research Journal, De Gruyter, vol. 2(2), pages 1-26, March.
    5. Ivan Miroshnychenko & Alfredo De Massis & Danny Miller & Roberto Barontini, 2021. "Family Business Growth Around the World," Entrepreneurship Theory and Practice, , vol. 45(4), pages 682-708, July.
    6. César Camisón-Zornoza & Beatriz Forés-Julián & Alba Puig-Denia & Sergio Camisón-Haba, 0. "Effects of ownership structure and corporate and family governance on dynamic capabilities in family firms," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-34.
    7. César Camisón-Zornoza & Beatriz Forés-Julián & Alba Puig-Denia & Sergio Camisón-Haba, 2020. "Effects of ownership structure and corporate and family governance on dynamic capabilities in family firms," International Entrepreneurship and Management Journal, Springer, vol. 16(4), pages 1393-1426, December.
    8. Marta Widz & Nadine Kammerlander, 2023. "Entrepreneurial exit intentions in emerging economies: a neoinstitutional perspective," Small Business Economics, Springer, vol. 60(2), pages 615-638, February.
    9. James J. Chrisman & Jess H. Chua & Allison W. Pearson & Tim Barnett, 2012. "Family Involvement, Family Influence, and Family–Centered Non–Economic Goals in Small Firms," Entrepreneurship Theory and Practice, , vol. 36(2), pages 267-293, March.
    10. Victor Cui & Shujun Ding & Mingzhi Liu & Zhenyu Wu, 2018. "Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective," Journal of Business Ethics, Springer, vol. 152(1), pages 291-309, September.
    11. Hsi-Mei Chung, 2013. "The role of family management and family ownership in diversification: The case of family business groups," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 871-891, September.
    12. Michael Carney & Marc Van Essen & Eric R. Gedajlovic & Pursey P.M.A.R. Heugens, 2015. "What do we know about Private Family Firms? A Meta–Analytical Review," Entrepreneurship Theory and Practice, , vol. 39(3), pages 513-544, May.
    13. Kyuho Jin & Joowon Lee & Sung Min Hong, 2021. "The Dark Side of Managing for the Long Run: Examining When Family Firms Create Value," Sustainability, MDPI, vol. 13(7), pages 1-20, March.
    14. Weiping Liu & Haibin Yang & Guangxi Zhang, 2012. "Does family business excel in firm performance? An institution-based view," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 965-987, December.
    15. Bowo Setiyono & Amine Tarazi, 2014. "Does the presence of institutional investors in family banks affect profitability and risk? Evidence from an emerging market," Working Papers hal-01077118, HAL.
    16. Mofir, 2020. "non disponibile," Mo.Fi.R. Working Papers 159, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    17. Reddy, Krishna & Wellalage, Nirosha Hewa, 2023. "Effects of family ownership and family management on the performance of entrepreneurial firms," Research in International Business and Finance, Elsevier, vol. 65(C).
    18. Isabelle Le Breton-Miller & Danny Miller, 2009. "Agency vs. Stewardship in Public Family Firms: A Social Embeddedness Reconciliation," Entrepreneurship Theory and Practice, , vol. 33(6), pages 1169-1191, November.
    19. Basco, Rodrigo, 2013. "The family's effect on family firm performance: A model testing the demographic and essence approaches," Journal of Family Business Strategy, Elsevier, vol. 4(1), pages 42-66.
    20. Nathan L. Hammond & Allison W. Pearson & Daniel T. Holt, 2016. "The Quagmire of Legacy in Family Firms: Definition and Implications of Family and Family Firm Legacy Orientations," Entrepreneurship Theory and Practice, , vol. 40(6), pages 1209-1231, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:123:y:2014:i:2:p:183-195. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.