Transforming the Management and Governance of Private Family Firms Prior to Initial Public Offerings: The Role of Venture Capital

NBER 2015 Entrepreneurship Working Group Meeting Paper

76 Pages Posted: 21 Aug 2015 Last revised: 29 Jan 2020

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Gang Hu

Hong Kong Polytechnic University - School of Accounting and Finance

Wu Chaopeng

Xiamen University - School of Management

Date Written: January 26, 2020

Abstract

We analyze the role of venture capitalists (VCs) in transforming the management and governance of China’s private family firms pre-IPO. We show, causally, that VC-backed family firms are more likely than non-VC backed family firms to experience departures of family members from top management positions and decreases in the separation between family control rights and cash-flow rights; these effects are stronger when VCs have greater equity ownership or board representation. We show that these changes in top management and governance in family firms are associated with higher IPO firm valuations and better post-IPO long run stock returns.

Keywords: Private Family Firms; Initial Public Offerings; Corporate Governance; Venture Capital; Top Management Changes

JEL Classification: G24, G34

Suggested Citation

Chemmanur, Thomas J. and Hu, Gang and Chaopeng, Wu, Transforming the Management and Governance of Private Family Firms Prior to Initial Public Offerings: The Role of Venture Capital (January 26, 2020). NBER 2015 Entrepreneurship Working Group Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2647546 or http://dx.doi.org/10.2139/ssrn.2647546

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Gang Hu

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M1038, Li Ka Shing Tower
Hung Hom, Kowloon
Hong Kong
(852) 3400 8455 (Phone)

HOME PAGE: http://ganghu.org

Wu Chaopeng

Xiamen University - School of Management ( email )

No.422 Siming Nan Road
Xiamen, Fujian 361005
China

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