Journal article

Founder's political connections, second generation involvement, and family firm performance: Evidence from China

Nianhang Xu, Qingbo Yuan, Xuanyu Jiang, Kam C Chan

Journal of Corporate Finance | ELSEVIER SCIENCE BV | Published : 2015

Abstract

We examine whether a specialized asset of family firms, founders' political connections, influences the second generation involvement in family firms in China. We further investigate the impact of such second generation involvement on firm performance. The findings suggest that founders' political connections are a critical factor in the decision of second generation involvement, with politically connected founders more likely to appoint a second generation as a family firm chairman, CEO, or director. The results are consistent with the transfer cost hypothesis of Bennedsen et al. (2015). Moreover, we document that second generation involvement enhances firm performance, with the curtailment..

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University of Melbourne Researchers

Grants

Awarded by National Natural Science Foundation of China


Awarded by Foundation for the Author of National Excellent Doctoral Dissertation of the People's Republic of China


Awarded by Fok Ying Tung Education Foundation


Funding Acknowledgements

We are grateful for the helpful comments from an anonymous reviewer, Morten Bennedsen, Joseph Fan (Guest Editors), Greg Clinch, Anne Lillis, Yi Zhang (the discussant), and the participants at the Journal of Corporate Finance Special Issue Conference on Family Firm Governance, Beijing, China, in June, 2013. Nianhang Xu would like to thank the financial support from the National Natural Science Foundation of China (Grant No. 71172180), the Foundation for the Author of National Excellent Doctoral Dissertation of the People's Republic of China (Grant No. 201085) and the Fok Ying Tung Education Foundation (Grant No. 141080). The usual caveats apply.