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Non-family chair and corporate performance

Author

Listed:
  • Fuxiu Jiang

    (Renmin University of China)

  • Xiaojia Zheng

    (Renmin University of China)

  • Wei Tang

    (Renmin University of China)

Abstract

Using a sample of Chinese family firms listed from 1999 to 2014, we investigate the relationship between non-family leadership and firm performance. We find that firms with a non-family member as board chair perform significantly worse than firms whose chair belongs to the family. Moreover, we show that the underperformance of non-family-chair firms is more pronounced when firms are under weaker outside monitoring and when the controlling families care less about family business longevity. The negative effect of a non-family chair is robust to a variety of endogeneity tests. We also dismiss alternative explanations other than concern for reputation. Overall, our empirical results suggest that the social norms regarding family reputation are important in shaping the controlling shareholders’ expropriation incentives and firm performance.

Suggested Citation

  • Fuxiu Jiang & Xiaojia Zheng & Wei Tang, 2018. "Non-family chair and corporate performance," Frontiers of Business Research in China, Springer, vol. 12(1), pages 1-30, December.
    • Handle: RePEc:spr:fobric:v:12:y:2018:i:1:d:10.1186_s11782-018-0038-6
    DOI: 10.1186/s11782-018-0038-6
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    More about this item

    Keywords

    Non-family chair; Non-family leadership; Corporate performance; Family firms; Family reputation;
    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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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