Research On Corporate Governance And Family Firms' M&A Activities

Since the beginning of the reform and opening in 1978,Chinese family firms have been flourish and many of them have landed capital market.The number of family firms listed in Shanghai stock exchange and Shenzhen stock exchange is sharply increasing.Nowadays,family firms have become an important part of national economy.In order to realize great-leap-forward development,more and more family firms adopt merger and acquisitions strategy.However,we notice that many M&As that adopted by family firms failed to create value for their shareholders.In spite of this,their excitement for M&As doesn't seem to go away,which is confusing in M&As research.Aiming to figure out this problem,this paper makes in-depth study in family firms M&As activities from the aspects of M&As decision and M&As performance.Meanwhile,compared to other kinds of companies,the ownership structure for family firms is particular,which makes controlling shareholders have great incentive to use their control right to maximize their profit.M&As can become a tool for controlling shareholders to seek personal gain.The paper has five chapters.Chapter One is the introduction of this paper,which illustrates the background,meaning and structure of this study.It also highlights the innovative points of this study.Chapter Two is literature review,which introduce corporate governance theories,M&As motives theories as well as the current research results of M&As decision and M&As performance.Chapter Three and Chapter Four are core parts of this paper.These two chapters respectively investigate the influence on M&As activities made by corporate governance of family firms from the perspectives of both M&As decision and M&As performance.We select a sample of family firms listed in Shanghai stock exchange and Shenzhen stock exchange.Moreover,we make Logit model and multiple regression model to do the empirical study.Chapter Five is the last chapter,which includes conclusion,suggestion and prospect for the study.By doing theoretical and empirical analysis,we draw the following conclusions.Firstly,the amount of family's control right is negatively correlated with M&As decision but positively correlated with M&As performance.Secondly,the wedge,which is the divergence between the amount of voting rights and cash flow rights,is positively correlated with M&As decision but negatively correlated with M&As performance.Thirdly,the proportion of independent directors in board is negatively correlated with M&As decision but positively correlated with M&As performance.Fourthly,the scale of board is negatively correlated with M&As decision.Lastly,the amount of management stock ownership is negatively correlated with M&As decision but positively correlated with M&As performance.According to the research findings,we put forward the following suggestions to improve M&As performance.Firstly,the supervisory duty for family controlling shareholder should be strengthen.Secondly,the mechanism that is used to protect investor should be improved.Thirdly,the independent director system should be perfected to assure independence.Lastly,the incentive system in family firms should be perfected and family firms should implement equity-based incentives at the right time.