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

Author

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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)

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.

Suggested Citation

  • Jin-Hui Luo & Heng Liu, 2014. "Family-Concentrated Ownership in Chinese PLCs: Does Ownership Concentration Always Enhance Corporate Value?," IJFS, MDPI, vol. 2(1), pages 1-19, February.
    • Handle: RePEc:gam:jijfss:v:2:y:2014:i:1:p:103-121:d:33548
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    References listed on IDEAS

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    2. Esra Memili, 2015. "Performance and Behavior of Family Firms," IJFS, MDPI, vol. 3(3), pages 1-8, September.

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