Founder Of Management, Market Environment And The Company Performance

Since mid1980s, the regulatory policies had been loosen gradually, which caused the booming of private sector and rapid growth of private enterprises in China. And the private sector is playing a more and more important role in the growth of Chinese economy. While private enterprises are growing in such a fast pace, their governance has many challenges to face with. One question to be answered is to what extent founder management is appropriate. On one side, during the long-lasting of creating and running her own firm, she had accumulated a great deal of management experience, authority and good relationship with governance officials. Thus, it may be good for the company that founder hold the key management position (such as CEO or chairman of board) in her own hand. On the other side, with time goes by, the environment in which the firm operates will change, the knowledge composition, ability and perspectives that the founder possesses will not be suitable for running a firm in such environment. Therefore, founder’s managing the firm by herself may become a burden to it. So, the question is whether it is necessary for founder to hold the key position in her own hand as the firm just started? The answer to this question will not only help us understand more on how the founder works in the corporate governance of private firms in theory, but also provide inspiration for the policies concerning private firms.This paper investigate whether founder takes the key management position(CEO or board chairman) will have a significant impact on firm performance by using private IPO firms in China between1997and2007as our sample. We find that, in general, firms with founder taking the key management position have better and more stable financial performance than those without. However, as the process of market reform proceeds, the effect of founder management diminishes. According to our research, that founder managing their firms by themselves is an effective corporate governance mechanism to private listed firms under current situation in China. Particularly, the positive effect of founder management is even more significance in those areas where market reform process is far less enough.This paper consists six chapters. In the first chapter, we introduce the background of this research, our main contributions and the structure of this paper. In the second chapter, we will have thorough discussion and analysis on the academic literature related to our topic, such as corporate governance, the impact of family control on firm performance and founder management. In the third chapter, we will analyze the relationship between founder management, market reform and firm performance, and their interactions in theory. Then we propose our hypothesis. In the fourth chapter, the selection of data and variables will be presented, together with a simple statistic analysis. In the fifth chapter, we present our regression results. First, we present only the results of the effect of founder management on firm performance. Then we take market reform and its interaction with founder management into account. Finally, we present a robustness check results. In the final chapter, we make a conclusion.