Transforming the Management and Governance of Private Family Firms in East Asia: The Role of Financial Intermediaries

NBER 2015 Entrepreneurship Working Group Meeting Paper

68 Pages Posted: 21 Aug 2015 Last revised: 21 Jun 2018

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: June 12, 2018

Abstract

In this paper, we empirically analyze the role of financial intermediaries, specifically, venture capitalists (VCs), in transforming the management and governance of Chinese family firms prior to their IPOs. Our results show that VC-backed family firms are more likely than non-VC backed family firms to experience departures of family members from top management positions as well as decreases in family control rights, cash-flow rights, and the separation between them; these effects are stronger when VCs have greater bargaining power or board representation in these firms. We show using propensity-score matching and Instrumental Variable (IV) analyses that the above results are causal. Finally, we find that the above changes in corporate governance and family member departures from top management positions are associated with correspondingly higher IPO firm valuations and long-run post-IPO stock returns for family firms.

Keywords: Family Firms; Corporate Governance; Top Management Changes; Initial Public Offerings (IPOs)

JEL Classification: G24, G34

Suggested Citation

Chemmanur, Thomas J. and Hu, Gang and Chaopeng, Wu, Transforming the Management and Governance of Private Family Firms in East Asia: The Role of Financial Intermediaries (June 12, 2018). 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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