TITLE:
Family-Owned Firms and Stock Returns: Evidence from the Chinese Stock Market
AUTHORS:
Caifen Zhang, Russell B. Gregory-Allen
KEYWORDS:
Family vs. Nonfamily Firms, Chinese Stock Market, CAPM, 3-Factor Model, Panel Regression
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.7,
May
17,
2018
ABSTRACT: We examine stock return performance of Chinese family-firms vs. Nonfamily-firms, and the impact on family-firm returns of firm size, having a founder as CEO, and levels of family ownership. We model returns with the Capital Asset Pricing Model (CAPM), the Fama-French 3-factor model, and a new 5-factor model we modified from Miralles-Marcelo, Miralles-Quirós, which adds factors for debt and illiquidity. In previous studies, though the prevalence is for family-firm outperformance, the results have been mixed. Using CAPM or the Fama-French 3-factor model, we find that family-firms outperform nonfamily-firms, but with the 5-factor model that outperformance vanishes, and this is robust to controlling for the GFC. For the founder CEO, firm size and family ownership considerations, again previous research has been mixed. With CAPM and Fama-French 3-factor models, we find that founder CEOs outperform nonfounder, large firms outperform small firms, and higher family ownership outperforms lower ownership. However, with the 5-factor model, only size remains as having significant impact. This study helps to reconcile conflicting results in previous research.