The Impact Of Family Involvement On Performance Of Corporate Governance

Family business is not only an ancient organization,but also an important component of modern private enterprises.They create a great deal of material wealth,and also provide job opportunities in hundreds.All these are useful to economic development and social stability.But they also face a lot of problems in the development of their own.Family business is a particular kind of economy which is formed by the intersection of both the family system and the enterprise system.Whether the integration of two major systems will be effective in improving corporate governance efficiency and promoting the performance of enterprise has become the focus of.Especially after becoming public,family business have to think about how to reduce agency conflicts and grasp the degree of internal governance of family involvement.On the basis of Principal-agent theory,Stewardship theory and Resource-based view,this paper analyzes the influence of family systems on corporate internal governance performance from the perspective of family involvement which is the connection of family systems and firm systems.Considering that modern corporate governance mechanism includes the shareholders' meeting,board of directors and top management team,family involvement involves three important dimensions,such as family ownership involvement,family executive power involvement and family decision-making involvement.On the basis of reviewing and analyzing the relevant research literature,this paper puts forward five hypotheses about the relationship of family involvement and governance performance.Then selects 116 private listed family enterprise of the year 2013 to 2015 and uses the unbalanced panel data to make the fixed effect of regress analysis.Through the empirical analysis we get the following conclusions:(1)There is a significant U-shaped relationship between family ownership involvement and governance performance.And when the proportion of family shareholding is within the interval of 32.7%-33.21%,it is unfavorable to performance improvement.(2)While family CEO inversely related to enterprise governance performance,increasing the proportion of family members in the executive team have a positive function on the improvement of governance performance.(3)Involvement of controlling right has a significantly inverted U-shaped relationship with firm governance performance.Namely that there is an optimal proportion of family directors and outside directors makes the business performance best.(4)The separation of ultimate cash flow rights and voting rights has a negative relationship with governance performance.(5)There is a significant positive interaction between family involvement of ownership and family involvement of executive power on internal governance performance.Accordingly,this paper argues that companies should establish an effective personnel selection system and promotion mechanism,efforts to increase decentralization to external managers to encourage their loyalty.In order to normalize family behaviors and to resolve family numbers' interest conflicts,it is necessary to establish family Council and family Constitution as a second-tier governance structure of family enterprises.Government should further improve relevant laws and supervision system to regulate the family business-related information disclosure mechanism.And for perfecting manager marketing in China,government should do something to strengthen partnership with industry associations.