TITLE:
Family Kinship and Actual Controller’s Reduction
AUTHORS:
Yuexin Kong, Wenkuan Tang
KEYWORDS:
Family Kinship, Major Shareholders’ Reduction, Scale of Reduction, Family Members Involving in Management, Financial Distress
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.8 No.8,
August
24,
2020
ABSTRACT: Based on the theory of social emotional wealth, this paper takes the
actual controller’s reduction of Chinese A-share family companies from 2005 to
2018 as samples. The article subdivides several kinds of kinship of family
companies into alienation and closeness, which contributes to explore influence
of reducing behavior and its moderating factors. The empirical findings show
that the actual controller reduction of family companies with alienated
relationships is significantly higher than that of close ones. That is, the
more distant the family members are, the more likely the actual controller of
the company is to choose large-scale reductions for short-term financial
wealth. In addition, the further findings are that if family members are
involved in the management, the difference between the scale of the reduction
of the alienated family business and the close relationship of the family
business will be reduced; and when the enterprise is in financial trouble, the
difference will be further amplified. This research not only promotes the
cross-integration of family business and the large shareholder’s reduction, but
also provides guidance and reference for how family business can improve governance
mechanism and optimize shareholding structure.