Research On Financing And Its Governance Efficiency Of Chinese Family Firms From The Family Authority Perspective

As it doesn’t like in China, in the West the effect of family was notemphasized, western scholars seldom focus on the family authority and allocationissues, leading to the insufficiency explanation for western mainstream financingtheory to the Chinese family firms practice. Under the profound influence ofConfucian culture in China, family authority and its allocation problem is anunavoidable subject both in theory and practice. Chinese family firms authority focuson allocation in the family, causes the complexity of financing behavior of Chinesefamily firms, as well as the unique financing structure. Therefore, this paper tries toanalyzing the financing behavior, financing way, financing structure and efficiencyproblem of Chinese family firms from the perspective of the family authority, in orderto make up the existing research on the Chinese family firms knowledge and lack ofexplanation of reality.Firstly, we discussed the financing behavior problem of family firms in Chinafrom the perspective of family authority (the authority of ownership and management).We can found from the research that the financing decision of family firms is acomplex management behavior under the pursuit of dual power, the growth and thefamily authority maintenance. Meanwhile, the family entrepreneur dominatesfinancing behavior, therefore, we explore the financing behavior and decision offamily entrepreneur from the family authority maintenance. And further clarify themain features of the financing behavior from family authority, we can learn thatfamily authority has significant influence on the financing behavior of the enterprises,family entrepreneur focus on the way of endogenous financing firstly, then on debtfinancing especially on short-term debt, last on the equity financing when they arefocus on the family authority maintenance. The family enterprises also focus onallocation effect of family ownership and family management authority, it would paymore attention to the external encouragement of manager stock right whenmanagement authority in the family prominent, namely appoint family member aschairman or general manager.Secondly, we discussed how to realize the scientific allocation of familyauthority and on the basis of family firms financing mode establishing problem. Thestudy found it’s undesirable whether shareholder’s ownership leading authority orentrepreneur human capital management leading mode of governance, the way of breaking through the dilemma of authority of the family firms allocation is toestablish a dynamic adaptation pattern including shareholder’s ownershipauthority and the entrepreneur human capital management authority, namely thedouble authority of dynamic adaptation mode. Thus, we can found that the financingmode of family firms should cooperate the family authority dynamic adaptationmechanism of “internal financing” with "external financing”,and "family equitycapital" with "external manager equity capital" and "social equity" cooperativefinancing mode.Then we explore the way of financing and family authority and the problem ofgovernance efficiency by integrating theories and demonstration, namely the effectway of the family management authority and the authority of family ownership,internal financing and external financing, and equity of family as well as externalmanager and the governance efficiency of society. The research found that theendogenous financing of the listed family firms, the share ratio of family andstate-owned legal person as well as bank has a positive significant governance effect.The financing of debt and the Z index and the proportion of family directors show asignificant type of inverted "U" on governance effect, while it is not significant whenthe family member are appointed as chairman or general manager with positivegovernance effect and external managerial ownership has inverted "U". On one hand,it shows that the leading effect and positive influence of family ownership authority atthe development of present Chinese family firms, and while excessive familymanagements authority is not conductive to it. On the other hand, Equity incentiveeffect of the external managers has not reflected, and the equity financing of externalmanagers should be strengthened.At last, Use the way of DEA-Malmquist to evaluate the overall governanceefficiency of family firms financing structure, and get a reasonable financing structureof family firms range under pursuit the double goals that the family authoritymaintenance and growth of firms,the range of Equity financing rate is (0.1,0.2],assets and liabilities rate is (0.4,0.5], endogenous financing rate is (0.2,0.3], theactual controlling proportion of shareholding is (0.2,0.3], Z index is (1,2]. Thestudy found that the overall continuing improvement trend of dynamic efficiencyof the listed family firms financing structure in China was shows that the goodmomentum of development of family business, but the static efficiency of thefinancing structure is not optimistic, the majority of enterprises in the inefficient state reflects financing structure of listed family firms in China are unreasonable, seriousshortage of external managers equity incentive (outside of the family firms executivesstake in the overall very low or even zero), there is no family authority and externalmanagers to manage the authoritative scientific allocation. In the same time, throughthe comparison of the financing structure of valid and invalid found that efficientcorporate equity financing is much lower than the proportion of inefficient enterprises,indicating the ownership authority within the family allocation is conducive toenhancing the value of the company. In the same time, the proper seperation ofownership authority and management authority will be conducive to the developmentof listed family enterprises in China at present.The main contribution of this paper are: it grasps the characteristics of Chinesefamily business financing, and systematically conduct the research on financingproblem of Chinese family firms from the perspective of family authority, it also has auseful exploratory research on the aspects of the formation mechanism of the familyauthority, the mechanisms of how family authority affects business financing, andfamily entrepreneurs financing behavior and decision based on the family authoritymaintenance dynamic mechanism, the conclusion has more realistic explanation.Innovatively constructs the effect mechanism model of the family authority impact onbusiness financing, the five forces mode of family entrepreneur financing choice,shareholder ownership authority and entrepreneur human capital managementauthority dual authority dynamic adaptation mode and dynamic mode of financingtheory model, then we get some original ideas.