Abstract
Based on the theory of social emotional wealth, this paper takes the actual controller’s reduction of Chinese A-share family companies from 2005 to 2018 as samples. The article subdivides several kinds of kinship of family companies into alienation and closeness, which contributes to explore influence of reducing behavior and its moderating factors. The empirical findings show that the actual controller reduction of family companies with alienated relationships is significantly higher than that of close ones. That is, the more distant the family members are, the more likely the actual controller of the company is to choose large-scale reductions for short-term financial wealth. In addition, the further findings are that if family members are involved in the management, the difference between the scale of the reduction of the alienated family business and the close relationship of the family business will be reduced; and when the enterprise is in financial trouble, the difference will be further amplified. This research not only promotes the cross-integration of family business and the large shareholder’s reduction, but also provides guidance and reference for how family business can improve governance mechanism and optimize shareholding structure.
Highlights
Nowadays, shareholders’ behavior of reducing holdings has become a blowout trend in China
We find that 23.0% of family businesses reduce their holdings when they encounter financial crisis (FD), but difference in the scale of reduction of different family businesses when they fall into financial crisis needs further verification below
The actual controller pays more attention to the accumulation of short-term financial wealth instead of social emotional wealth theory (SEW), which was reflected in a larger reduction ratio and a higher reduction frequency
Summary
Shareholders’ behavior of reducing holdings has become a blowout trend in China. The contributions of this article are as follows: Firstly, it grasps the research hot spot of major shareholders’ reduction of holdings, focuses on the phenomenon of family major shareholders (actual controllers) reducing holdings in reality and explores the influencing factor of family business relationships. It proves that the close family business and the distant family business have different effects on the scale of reduction of the actual controller.
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