A Study On The Control Rights In Family Business

The matching of residual claim and control rights is generally regarded as the iron rule in the corporate contractual structure. Focus on the corporate governance, moreover, should be the sharing arrangement of control rights, for it not only influences the property-right frame, but the efficiency of corporate operation. This thesis aims to explore the sharing and succeeding process of the control rights in family business on both theoretical and practical basis.Even though entrepreneurs in Chinese family firms are willing to share the rights of control with the outsiders on account of their declining ability to handle the whole business, they incline to maintain the core layer of control within family members. The thesis points out that sharing of control is also "state-contingent". "State" here refers to the declining situation of the entrepreneurs' capacity. Furthermore, for those rights which can be defined by contract, sharing process is much easier than those of the core decision rights. This depends on the entrepreneurs' ability and risk anticipation in the game with those so-called outsiders.As in Chinese society, relationship net displays the characteristic of orders, that is , people judge others by how close they are. Layers of relationship are accordingly created. Family business owners may naturally prefer their children to take control of the business. Later in this thesis, layers of the succeeding of control rights are defined. Surface is the succeeding of the title, middle the career and core the succession and recreation of the identity power.After the two parts of discussion above, the thesis finally draws the following conclusion: succeeding of control rights is path-dependent and first choice of the entrepreneurs in Chinese family business. Thus, it is important to cultivate the family member to become a real entrepreneur. A model in this thesis may help to discover how to realize this dream.