What is it about?

The change of governance model in the succession of family firms will have an important impact on firm performance. Based on the widespread altruism and conflicts in family firms, this paper proposes a theoretical model to explain the relationship among succession, corporate governance reform and performance. This study conducts an empirical study on 295 Chinese listed family firms that initiated succession from 2008 to 2018 to test the model. The empirical results suggest that (a) conflicts caused by succession have a negative impact on a firm’s perfornace; (b) the succession positively affect the corporate governance reform; (c) corporate governance reform has a mediating effect between succession and firm performance, and governance reform of management and governance reform of ownership have differential (inconsistent) effects on a family firm’s performance.

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Why is it important?

The research results of this paper reveal a mediation path and transmission mechanism of the impact of succession on corporate performance from the perspective of corporate governance, which provides a reference for family firms to make succession decisions and deal with governance changes.

Perspectives

 Succession has accelerated the governance reform of family firms from traditional "family" governance to "non-family" governance.  In succession, the governance reform of management can promote the improvement of corporate performance, while the governance reform of ownership is not conducive to the improvement of corporate performance in the unique market environment of China.  Governance reform of management and ownership represent contrasting effects on a family firm’s performance, thus highlighting the inconsistent effects of various corporate governance reform dimensions on a family firm behavior.

Linchuan Wang
Hefei University of Technology

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This page is a summary of: Succession, Corporate Governance Reform, and Performance: Evidence from Chinese Listed Family Firms, SSRN Electronic Journal, January 2021, Elsevier,
DOI: 10.2139/ssrn.3967990.
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