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How Inheritance Law Affects Family Firm Performance: Evidence From A Natural Experiment, Yong Kyu Gam, Min Jung Kang, Junho Park, Hojong Shin
How Inheritance Law Affects Family Firm Performance: Evidence From A Natural Experiment, Yong Kyu Gam, Min Jung Kang, Junho Park, Hojong Shin
Research Collection Lee Kong Chian School Of Business
We argue that changes in the inheritance system affect incentives leading to sibling rivalry among descendants and therefore have a material impact on family firm performance. Using South Korea's 1991 inheritance law reform that stipulates the equal distribution of a deceased person's property to descendants, we find that the performance and operating growth rate in family firms show significant enhancement compared with those of nonfamily firms. Moreover, the positive effects are greater for family firms that undergo a business succession with multiple sons and married daughters. Overall, our results suggest that changing to equal bequests of inheritance has a positive …
One-Child Policy And Family Firms In China, Cao, Jerry X., Douglas Cumming, Xiaoming Wang
One-Child Policy And Family Firms In China, Cao, Jerry X., Douglas Cumming, Xiaoming Wang
Research Collection Lee Kong Chian School Of Business
Family business plays important roles to fuel economic growth in China. Due to the one-child policy, family firms are increasingly facing human capital constraints for within-family succession. Having only one heir decreases the probability of continuing family management by over 3%, reduces the probability of adult children working in family firms by 14%, and significantly decreases founders' expectations of having young heirs for succession. Having fewer children negatively affects founder's expectation to go public, reduces family firm's reinvestment rate and R&D. Overall, the evidence suggests that the human capital constraints due to the one-child policy impose significant negative impacts on …
Conservatism And Equity Ownership Of The Founding Family, Shuping Chen, Xia Chen, Qiang Cheng
Conservatism And Equity Ownership Of The Founding Family, Shuping Chen, Xia Chen, Qiang Cheng
Research Collection School Of Accountancy
We investigate the impact of founding family ownership on accounting conservatism. Family ownership is characterised by large, under-diversified equity stake and long investment horizon. These features give family owners both the incentives and the ability to implement conservative financial reporting to reduce legal liability and mitigate agency conflicts with other stakeholders. Since CEOs can have different incentives towards conservatism, we focus on ownership of non-CEO founding family members in our investigation. We find that conservatism increases with non-CEO family ownership, supporting our prediction. This relationship becomes insignificant in family firms with founders serving as CEOs, either due to founder CEOs' …