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Int. J. Financial Stud. 2014, 2(1), 103-121; doi:10.3390/ijfs2010103
Article

Family-Concentrated Ownership in Chinese PLCs: Does Ownership Concentration Always Enhance Corporate Value?

1,*  and 2
1 Department of Accounting, School of Management, Xiamen University, No. 422 Siming South Road, Xiamen 361005, China 2 Department of Business Administration, Lingnan College, SUN YAT-SEN University, Guangzhou 510275, China
* Author to whom correspondence should be addressed.
Received: 5 December 2013 / Revised: 11 February 2014 / Accepted: 14 February 2014 / Published: 28 February 2014
(This article belongs to the Special Issue Performance and Behavior of Family Firms)
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Abstract

In this paper we investigate the relationship between family ownership structure and corporate value across a sample of 1314 firm-year observations of China’s family publicly listed companies (PLCs), from 2004 to 2008. We find a significant inverse-U-shaped relationship between the controlling family’s ultimate cash-flow rights and corporate value; as measured by Tobin’s Q. That is, as family-ownership concentration increases, corporate value first increases and then decreases. This finding refreshes our understanding of the relationship between family-ownership concentration and corporate value in emerging economies such as found in China. We corroborate prior findings that when controlling families hold excess control over cash-flow rights, corporate value is significantly lowered, while multiple large shareholders structure is significantly associated with higher corporate value. In addition; board independence is found to significantly improve corporate value in the context of family-concentrated ownership. We also test for potential endogeneity between family ownership and corporate value and find our results to be robust.
Keywords: China; corporate value; family concentrated ownership; family firms; ultimate ownership structure China; corporate value; family concentrated ownership; family firms; ultimate ownership structure
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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Luo, J.-H.; Liu, H. Family-Concentrated Ownership in Chinese PLCs: Does Ownership Concentration Always Enhance Corporate Value? Int. J. Financial Stud. 2014, 2, 103-121.

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