Children Structure In The Entrepreneur's Family And The Firm's Sustainable Growth

Family Firm is composed of two systems:family and firm.Thus it has dual targets,one is of family and another is of firm.There are many ways to express firm's goal.Such as 'profit maximization','shareholder's value maximization','enterprise value maximization',or 'stakeholder's interests maximization'.No matter how the expressions differ,the premise is the existence of firm.It means firm's sustainable growth,which is the common target of global firms.But family's goal is closely related to the local culture.Cultural factors such as ethics,customs and behavior standards affect family goals,thus further affect corporate decisions as a result.The core of traditional Chinese culture is the 'home',which is deeply influenced by Confucianism.Family ethics attaches great importance to family continuity and family business inheritance.In traditional Chinese society,a male blood is the the continuity of family.Only male offspring can inherit the family,while women can't.The ways to treat others are different from inside and outside of the family.People trust in family members only,and lack trust in others.Therefore,son is preferred in succession.It means family intent to succeed and built family property to last when family has male offspring.Female offspring has no effect on family's succession intention.Does this unique traditional family culture affect family goals and further affect corporate financial behaviors?To answer these questions,I choose A Shares Listed entrepreneurs whom listed on Forbes Chinese Fortune 400 Billboard from 2010 to 2016 as research samples.And review lots of related literature.Then use the children structure in entrepreneur's family as proxy measurement to family succession intention to analysis its impact on corporate financial behavior.Firstly,I examine the relationship of entrepreneur's children structure and firm's sustainable growth;secondly,based on Higgins SGR model,I further study the impact of entrepreneur's children structure on corporate cash dividend policy,operating policy and debt policy separately.The dissertation consists of eight chapters:Chapter 1 introduces the research briefly,including background and issues,contents and framework,and main contributions.Chapter 2 reviews the literature on the financial evaluation of firm's sustainable growth and it's affecting factors,and the effect of family on the firm's financial behavior and the governance structure as well.Chapter 3 introduces the impact of traditional Chinese family culture on the succession intention of family firm.It is proposed that children structure in entrepreneur's family is used as an proxy measurement to entrepreneur's succession intention.Chapter 4 analyzes the impact of children structure in entrepreneur's family on firm's sustainable growth.It is found that firm's sustainable growth would be improved if entrepreneur has sons.And the more sons entrepreneur has,the more the firm's sustainable growth is improved.While daughters will not affect firm's sustainable growth.It means that traditional Chinese family culture do influence the family succession target,and further affect firm's sustainable growth.If entrepreneur has son,they would have strong willingness to succeed and commit to firm's sustainable growth.Thus firm is more long-term oriental.On the one hand,more sons will increase the possibility for entrepreneur to acquire outstanding successors.On the other hand,the average allocation during Chinese property inheritance disperses family's property,which will result weakness for family continuity.To avoid the weakness,the family will try to expand family business to accumulate more wealth.But daughters have no positive effect on entrepreneur's succession intention,so they won't contribute to firm's sustainable growth.Chapter 5 analyzes the relationship between children structure in entrepreneur's family and corporate cash dividend policy.It is found that if entrepreneurs has son,corporate cash dividend will decreased significantly.And the more sons entrepreneur has,the more corporate cash dividend payment decrease.But daughters have no significant effect on corporate cash dividend policy.This indicates that when entrepreneur has son,the firm is more long-term oriental.Thus entrepreneur will keep profit inside of firm rather than pay to shareholders,so as to support the future development of firm.Moreover,due to family's desire to keep control over firm,the retained earnings become the preferred most important sources of internal financing.Therefore,the enterprise shows a lower willingness to pay cash dividend.But daughters do not strengthen entrepreneur's willingness to succeed,so it has no effect on corporate cash dividend policy.Chapter 6 analyzes the relationship between children structure in entrepreneur's family and corporate operating performance.It is found that corporate operating performance would be improved if entrepreneur has son.And the more sons entrepreneur has,the higher corporate operating performance is.But daughters have no effect on corporate operating performance.This shows that when the enterprise has the willingness to inherit,he will strive to improve the corporate operating performance through changing operating policy to promote firm's sustainable growth.But daughters will not strengthen entrepreneur's willingness to succeed,and thus have no significant impact on corporate operating performance.Chapter 7 analyses the relationship between children structure in entrepreneur's family and corporate debt policy.It is found that firm's debt level rises significantly if entrepreneur has son.And the more sons entrepreneur has,the higher corporate debt level is.But daughters have a significant negative correlation with corporate debt level.It means that when entrepreneur has succession intention,he would like to debt financing rather than equity financing.On the one hand,such a financing preference can keep family's control over firm in order to hand the business smoothly to family next generation.On the other hand,it will also improve firm's sustainable growth.However,if entrepreneur has daughters,he will not enhance their willingness to inherit.Moreover,the influence of daughter's female conservative tendencies may affect their parents,as a result their parents are more likely to be risk aversion,thus decrease corporate debt level.Chapter 8 makes a summary and shows limitations of the study,and point out future directions as well.The potential contributions of this dissertation are as follows:Firstly,in theory,there is not much research on the relationship between senior executive's family structure and firm's sustainable growth.This study use children structure in entrepreneur's family as proxy variable to analyze firm's sustainable growth from the perspective of traditional Chinese family culture.It avoids endogenous and other factors' impact,thus reflect the impact of unique succession intention of family firm on corporate financial behavior more clearly.And help us have a better understanding of the role of traditional family culture in corporate financial decision-making.It also enrich the research of cultural and finance.Secondly,in practice,this empirical findings shows that firm's financial decision is closed related to the local culture.Children structure in entrepreneur's family will affect the entrepreneur's succession intention.Further influence firm's sustainable growth and firm's financial decisions profoundly as a result.Therefore,understanding the local family culture will help investors to have a better understanding of the logic behind corporate financial behavior.