Shujun Ding

Accounting Properties of Chinese Family Firms

We posit that family firms in China exhibit accounting properties consistent with the prevalence of Type II agency problems. In contrast to the owners of non-family firms, the owners of family firms have more incentives to seek private benefits of control at the expense of minority shareholders and provide lower-quality earnings for self-interested purposes. The empirical evidence presented in this study suggests that the accounting earnings of listed Chinese family firms are less informative, and family firms employ less conservative accounting practices than their non-family counterparts. We also find that Chinese family firms have higher discretionary accruals compared to non-family firms, which is consistent with the view that family firms engage in more opportunistic reporting behavior. Overall, our study suggests that family ownership in China is associated with lower earnings quality, which is in sharp contrast to the findings of prior studies that examine such ownership in the U.S.

Effect of foreign ownership on cost of borrowing: Evidence from small and medium-sized enterprises in China

This article draws upon a sample of more than 27,000 Chinese small and medium-sized enterprises (SMEs) to explore whether and how foreign equity investment in local SMEs affects the cost of debt. The results show that foreign ownership lowers the cost of borrowing for Chinese SMEs, and that this effect is stronger in more developed provinces. These findings contribute to evidence regarding the halo effect of foreign direct investment in emerging markets. This study also expands pecking order theory by demonstrating the signalling effect of equity structure characteristics on debt financing.

Family Control, International Accounting Standards, and Access to Foreign Banks: Evidence from International Entrepreneurial Firms

This article aims to understand if a change in accounting standards offers new avenues for helping entrepreneurial firms, especially those family-controlled ones, to obtain debt financing from foreign banks. We find that amid the global wave of adopting International Accounting Standards (IAS), family-controlled firms tend not to voluntarily switch from local generally accepted accounting principles to IAS. After self-selection issues are taken into account, furthermore, entrepreneurial firms adopting IAS experience less difficulty accessing loans from international banks. However, IAS adoption differentially influences private firms, family owned versus nonfamily controlled, in terms of their access to debt capital.

A separate monitoring organ and disclosure of firm-specific information

As the economy is recovering from the recent financial crisis, we explore the appropriateness of a corporate monitoring organ, which is a component separate from the board of directors, to enhance firm-specific information disclosure. Findings of this study, rooted in the evidence from Chinas stock markets, confirm that having a separate and effective monitoring organ results in a higher level of idiosyncratic risk, as long as the legal environment is sufficiently strong and the functionality of this separate monitoring organ is clearly defined. Effects of regulatory changes and ownership characteristics are addressed to help better understand the corporate governance–idiosyncratic risk relationship. Moreover, this study sheds light on timely global issues about information transparency and supervision, the lack of which becomes one of the major causes of the ongoing financial crisis, and presents an important challenge before corporate governance.

Family involvement and R&D expenses in the context of weak property rights protection: an examination of non-state-owned listed companies in China

ABSTRACT The impact of family involvement on firm behaviour is an issue of global interest, yet paradoxically few studies examine the behaviour of family firms in the unique socio-political environment of China. We investigate the cross-institutional generalizability of the behavioural agency model, emphasizing the non-economic goals of controlling families as a driver of unique yet predictable behaviours in Chinese family firms and examine the relationship between family involvement and the R&D expenses reported by these firms. We propose that in a context of weak property rights protection such as China’s, the opportunity for family owners to attain transgenerational control is subject to the additional risk of state predation. We consequently expect economic goals to prevail over family-centred non-economic goals in Chinese family firms and hypothesize that their reported R&D expenses increase with family involvement due to severe Type II agency problems. Moreover, we examine the effect of positive and negative performance feedback on this relationship. Longitudinal data from non-state-owned listed companies in China provide overall support for these contentions. We discuss the theoretical and practical implications of these findings.

Family Business Development in Mainland China: From 1872 to 1949

Abstract This study reviews family business in mainland China from 1872 to 1949 and provides evidence of its early development and its origins in 1872 when the first modern manufacturing firm was founded. We analyse the social, economic, and political environment in which family firms in mainland China were embedded to improve our understanding of how this unique organisational form was established and developed. Our analyses cover the late Qing Dynasty and the period from 1912 to 1949 during which the Republic of China (ROC) ruled mainland China. Implications for current family business theory and practice are discussed.

Institutional Shareholders and Executive Compensation: An Ethical View

While institutional shareholders are shown to be effective monitors in curbing executive compensation in mature capital markets, this study presents findings from Chinese stock markets, and indicates the possible collusion between institutional shareholders (e.g. mutual funds) and executives in publicly listed companies. Mutual funds in China fail to serve as an effective monitor of executive compensation, suggesting that ethics seems to play no part when mutual funds and the management of listed companies extract their self-interests. Further analysis also demonstrates that, while bank-affiliated mutual funds are not better monitors than non-bank-affiliated ones, joint-equity-bank-affiliated ones are more effective monitors than state-owned-bank-affiliated ones.