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Family CEOs: Do they benefit firm performance in China?

Author

Listed:
  • Di Cai

    ()

  • Jin-hui Luo

    ()

  • Di-fang Wan

    ()

Abstract

Family firms throughout the world commonly appoint family members as CEOs. However, the value of family CEOs is a subject of ongoing debate. This study attempts to further illuminate the debate in two ways. First, we extend this debate to China, a new and underexplored context, where family businesses are relatively new but growing rapidly. Second, drawing on both principal–agent (PA) and principal–principal (PP) perspectives of agency theory and the institution-based view, we argue that family CEOs are overall, of positive value in China where formal institutions are weak, but this positive effect varies in relative strength across family firms that have different concentrated-ownership structures. Using a sample of 913 firm-year observations for 351 Chinese listed family companies from 2004 to 2007, we find that family CEOs, as a whole, are positively related to firm performance, as measured by both market-based and accounting-based performance, reflecting Tobin’s Q and ROA. Further analyses reveal a stronger positive effect in family firms when family owners have higher ownership, when family ownership and family control are less divergent, and when the firms have multiple-large-shareholder structures. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Di Cai & Jin-hui Luo & Di-fang Wan, 2012. "Family CEOs: Do they benefit firm performance in China?," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 923-947, December.
  • Handle: RePEc:kap:asiapa:v:29:y:2012:i:4:p:923-947
    DOI: 10.1007/s10490-012-9318-4
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    References listed on IDEAS

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    Cited by:

    1. Bodolica, Virginia & Spraggon, Martin & Zaidi, Sahar, 2015. "Boundary management strategies for governing family firms: A UAE-based case study," Journal of Business Research, Elsevier, vol. 68(3), pages 684-693.
    2. repec:spr:jbecon:v:88:y:2018:i:2:d:10.1007_s11573-017-0871-7 is not listed on IDEAS
    3. Santiago Lago-Peñas & Mercedes Mareque Álvarez-Santullano & Elena Rivo-López & Mónica Villanueva-Villar, 2017. "Determining factors for audit opinion in private family and non-family firms. Evidence from Spain," Working Papers. Collection C: Family business 1701, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Poutziouris, Panikkos & Savva, Christos S. & Hadjielias, Elias, 2015. "Family involvement and firm performance: Evidence from UK listed firms," Journal of Family Business Strategy, Elsevier, vol. 6(1), pages 14-32.
    5. repec:kap:asiapa:v:34:y:2017:i:3:d:10.1007_s10490-016-9499-3 is not listed on IDEAS

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