The effect of succession on corporate governance reform under the Chinese clan culture context

Abstract

PurposeThe fundamental component of Confucian culture is clan culture, which stresses that family ties are the most important of all social relationships and have an essential impact on the governance model of family firms in Southeast Asian countries, especially in China. This study investigates complex relationships among family firm succession and corporate governance reform in the context of Chinese clan culture.Design/methodology/approachDrawing upon the analysis of altruistic behavior and conflict in succession process in family firm, the study uses a moderation model to capture the relationships between succession and governance reform in the context of clan culture. This study conducts an empirical study on 295 Chinese listed family firms that initiated intergenerational succession from 2008 to 2018 to test the model.FindingsThe empirical results suggest that the different stages of the succession will positively affect the family firm's governance reform, whether it is the stage in which the successor takes over the firm or the stage in which the successor completely controls the firm. Furthermore, the succession-governance reform relationship is negatively moderated by the clan concept of the actual controller.Originality/valueThis paper fulfills an identified need to study how succession in the family firm can accelerate corporate governance reform (transition from relation-based governance to rule-based governance). The research results provide evidence from the firm-level under the Chinese clan culture context to understand the complex relationship between succession and corporate governance.