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Second-generation Succession and the Financialization of Assets: An Empirical Study of Chinese Family Firms

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  • Jiaqi Chen
  • Fangzhao Zhou
  • Zhifang He
  • Hui Fu

Abstract

This research examines whether intra-family leadership succession in Chinese family firms influences the decision to allocate more financial assets, the factors that influence second-generation successors in making such decisions, and their impacts on firm performance. The study collected firm and CEO data in which second-generation CEOs’ characteristics were captured, and the findings suggest second-generational involvement is a critical factor in the financialization of assets. Furthermore, the study finds that second-generation CEOs’ characteristics, market competition, and financing constraints have significant effects on second-generation successors when making asset-allocating decisions, and this is particularly true for financing constraints due to capital reserve motivations. The study finds no significant relationship between the financialization of assets in second-generation family firms and the family firms’ performance. This implies that firm innovation does not mean to neglect primary operating business. The results are robust after considering possible endogeneity issues and to various specifications of variables.

Suggested Citation

  • Jiaqi Chen & Fangzhao Zhou & Zhifang He & Hui Fu, 2020. "Second-generation Succession and the Financialization of Assets: An Empirical Study of Chinese Family Firms," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(14), pages 3294-3319, November.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:14:p:3294-3319
    DOI: 10.1080/1540496X.2019.1695592
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    Cited by:

    1. Zhao, Yan & Su, Kun, 2022. "Economic policy uncertainty and corporate financialization: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    2. Fathallah, Ramzi & Carney, Michael, 2024. "The business family as an institutional arbitrageur: Internationalization across institutional contexts," Journal of World Business, Elsevier, vol. 59(2).
    3. Yang, Baochen & Chen, Fengrui, 2023. "The financialization of nonfinancial companies in China: A macroeconomic perspective," Finance Research Letters, Elsevier, vol. 53(C).
    4. Guo, Chong & Jiang, Yalin & Yu, Fang & Wu, Yingyu, 2023. "Does environmental information disclosure promote or prohibit financialization of non-financial firms? Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 200-214.
    5. Su, Kun & Zhao, Yan & Wang, Yinghui, 2024. "Customer concentration and corporate financialization: Evidence from non-financial firms in China," Research in International Business and Finance, Elsevier, vol. 68(C).
    6. Chen, Yueyan & Shen, Baohua & Cao, Yawei & Wang, Shuyu, 2024. "CEO social capital, financing constraints and corporate financialisation: Evidence from Chinese listed companies," Finance Research Letters, Elsevier, vol. 60(C).

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