Study On The Relationship Between Actual Controller Background Characteristics And Corporate Risk Taking Of Family Business

Family business is a very important and historic economic organization, it’s a kind of business form which holds a large number and accounts for a larger proportion of the country’s GDP in the world. It has a pivotal position in the world economy and plays an important role in solving social employment, the stability of economic operation and so on. Chinese private economy and modern family business is gradually flourished accompanied by the reform and opening up and construction of socialist market economic system. National government continues to introduce various policies to support the development of private economy. Since the reform and opening up, China’s economic growth history is also a history of the vigorous development of Chinese family business. The solidarity spirit, dedication spirit, innovative spirit and high cohesion of family business culture has attracted worldwide attention. Along with the deepening reform of the economic system, Chinese modern family business is facing unprecedented development opportunities and will burst out amazing wealth creativity in a more broad stage. The actual controller is the core and soul of the family business and is the helm of the family business, he decides the family business operating and management decision-making, determines the direction and pace of the development of enterprise. Any analysis of the family business can not ignore the existence of entrepreneurs, business owners, or the actual controller. Corporate risk taking manifests in risk preference of enterprises in investment decision and the choice of investment projects. Because high-risk projects can bring higher expected returns than low-risk projects, investment in higher risk projects can accelerate the accumulation of social capital and promote technological progress, maintain the productivity of the whole society at a higher level. In addition, the level of corporate risk taking has a positive correlation with asset growth rate, capital allocation efficiency, sales revenue growth rate and the market value of the corporate. Based on the concern of family business risks, this paper studies the influence of actual controller background characteristics of the family business on the level of corporate risk taking.This paper first reviews the domestic and foreign research status related to the family business, the actual controller and corporate risk taking, based on the overall summary and evaluation of the literature, makes theoretical analysis and puts forward the research hypothesis. This paper selects 370 family businesses as samples, which listed on the Shanghai and Shenzhen stock exchange and the actual controller was a natural person and did not change during 2009-2012, uses the volatility of corporate profits to measure the level of corporate risk taking, studies the effect of actual controller background characteristics of the family business on corporate risk taking. Taking into account the executive tenure of listed corporation in China is generally three years, in order to eliminate the impact of executive turnover, this paper takes three years as an observation period, observation period using the year rolling method, 2009-2011 is the first observation period,2010-2012 is the second observation period. Through multiple linear regression analysis yield the following conclusion. The actual controller’s age of family business and corporate risk taking is significantly negative correlation. The actual controller’s educational level of family business and corporate risk taking is significantly positively correlated. There was no significant correlation between the actual controller’s gender, professional background and political relations of family business and corporate risk taking. Further, this paper categorizes the sample according to whether the actual controller participates in enterprise management, finds that the conclusion is mainly reflected in the listed companies whose actual controller participates in enterprise management. The level of corporate risk taking has an important influence on economic development, to further examine the impact of risk taking on firm value find that risk taking and corporate value is significantly positively related, and this relationship is mainly reflected in the listing family business whose actual controller participate in enterprise management.This paper from the perspective of the actual controller to carry out research, actual controller has the ultimate control of decision-making for the family business, studying the influence of personal background characteristics on enterprise enriches the study on personal background characteristics and corporate governance, paying attention to the corporate risk taking of family business enriches the research on influencing factors of corporate risk taking. From the perspective of behavioral finance, the analysis of the actual controller’s background characteristics how to affect the corporate risk taking and thereby affect the firm value is of great significance for investors to predict the corporate investment policies and capital allocation efficiency, and to analyze the value and growth ability of enterprises, and to make better investment decisions. The results of the study show that the actual controller’s age and educational level of the family business and corporate risk taking have a significant correlation, however the actual controller’s gender, professional background and political association of the family business and corporate risk taking are not significantly correlated. Therefore, family enterprises in order to improve corporate risk taking can transfer the efforts paid in professional background and political connections to the other aspects which can significantly influence the level of corporate risk taking on this account to improve the utilization efficiency of the enterprise limited resources and to enable enterprises to better more long-term development, achieve the everlasting. In order to improve the efficiency of capital allocation, increase the value of the enterprise, enhance the growth ability of enterprise, and make better investment decisions, family business needs to strengthen the cultivation of family business successors, improve family business successors’ educational level, intergenerational transfer in a timely manner, hereby promote the inheritance and re-creation in a new round of family wealth. At the same time, in the current market environment family business needs to balance family holdings and modern enterprise system, make full use of the superiority of the professional manager system, find the balance point of separation and centralization of power, let professional managers under the premise of effective supervision and restriction to give full play to the director.