Family Control And Firm Value: Evidence From China Private Listed Companies

Based on theories of corporate governance, the article makes a theoretic and pragmatic study on the relation between family control and firm value of private listed companies. Private listed companies have the characteristics of family businesses and modern firms that bring dual agency relationship: the relationship between controlling shareholders and small shareholders and the relationship between shareholders and managers. This dual agency relationship plays great role on governance and value of private companies. The article aims to answer two questions: is the family control efficient and how to influence firm performance? Should private listed companies process the evolution from family governance to professional operation? The article views the point that it is the key point of private companies' development whether they could establish an optimizing governance structure. No matter what governance structure they choose, it is an adaptive institutional arrangement.Firstly, the article summarizes the actuality of family control in listed companies all over the world. In China, family or family firms control most private listed companies. Family businesses still play an important role in economy. The article explores the economic characteristics of family control from the view of altruism and informal contracts. Then the article compares family governance systems with the modern firm constitutions with regards to transaction cost, property right and agency problems.The article emphatically analyses the governance of family control in listed companies. On the basis of dual agency relationships under family governance, the article discusses the effect of agency costs on firms' value during the development of family businesses. On the early stage of family businesses, altruism plays a positive role in governance and informal contracts enhance the coherence of family. Family businesses have competitive advantages and grow up quickly. But as family businesses expand, agency problems caused by family contracts may become serious. Family controlling shareholders may have the incentive to deprive the rights of small shareholders and the agency costs that family members manage firms may high. Both...