Structural Tool Controlling and Total Factor Productivity of Family Businesses:A Perspective of Maintaining Family Control
The uniqueness of family business governance lies in its dual objectives:not only pursuing the steady de-velopment of family businesses but also providing continuous support for the growth and expansion of the family.This makes maintaining family control a key priority for family business managers in their decision-making.Family ownership and control rights are essential foundations for maintaining family control,and their allocation significantly impacts the family control over the business.However,to facilitate entry and exit,the controlling family tends to directly hold shares as natural persons at the early stages.However,family control and ownership gradually disperse as more family members participate in shareholding and management,thereby increasing the difficulty of maintaining family control.Notably,suc-cession is an inevitable process in the development of family businesses,where apart from the replacement of managers,the more likely and significant impact lies in the dispersion of family ownership and control,subsequently weakening con-trol over family businesses.Utilizing structural tools to lock in family ownership and control is a significant countermeasure employed by practi-tioners,such as the Rockefeller family of ExxonMobil,the Bill Gates family of Microsoft,and the Walton family of Walmart.The statistics in this paper show that in 2019,644 of the 1448 family businesses listed in the A-share market employed structural tool controlling,accounting for as high as 44.48％of the total.The structural tools primarily refer to legal entities or structures with clear legal provisions and recognition,exemplified by family holding companies,family limited partnerships,family foundations,and family trusts.Their primary function is to hold controlling stakes in family businesses on behalf of family members,without engaging in substantial business operations.The introduction of struc-tural tools transforms the family-to-family business holding model into a family-to-structural tool-to-family business hold-ing model,thereby severing the direct rights connection between family members and the family business and achieving the locking-in of family ownership and control.Despite the increasing prevalence of structural tools,there is still a lack of detailed literature addressing whether they have achieved the goal of stabilizing family control and whether they have facili-tated the development of family businesses.In terms of theoretical foundation,most of existing literature discussing family business governance is based on the principal-agent theory.However,family business governance almost completely violates all the basic assumptions of tra-ditional corporate governance theory,due to the unique characteristics of family businesses,including their pursuit of both family-centric and business-oriented goals.Therefore,analyzing the behavior of family businesses requires viewing their outcomes as a function of the characteristics of both the family and the family business.In response to this,the fam-ily business triangle theory focuses on the multiple objective characteristics of family business governance and proposes that the core of family business governance is to achieve a balance between the growing capital demands of family busi-nesses,the evolving liquidity needs of family shareholders,and the impact of both on maintaining family control.There-fore,this paper introduces the family business triangle theory and empirically tests the impact of structural tools on the to-tal factor productivity(TFP)of family businesses,using a sample of family businesses listed on the A-share market from 2003 to 2020.The results show that structural tools can enhance the TFP of family businesses by alleviating financing constraints and improving resource allocation.Furthermore,the positive effect of structural tools on the TFP of family businesses is particularly evident in family businesses after intergenerational succession,with deeper involvement of fam-ily management,higher operational risks,and a more balanced equity structure.The marginal contributions are mainly reflected in the following aspects.Firstly,existing literature tends to focus on the family as a single entity,neglecting the crucial impact of internal power allocation within the family.This paper takes structural tools used to control family businesses as the starting point for research,supplementing the study on the influ-ence of internal power allocation on family businesses.Secondly,typical family businesses virtually violate all the funda-mental assumptions of traditional governance theories.Introducing the family business triangle theory,this paper consid-ers the TFP of family businesses as the result of the combined effects of key objectives of both the family and the family business,thereby enriching the application of family business governance theories.Thirdly,Chinese family businesses are currently in a critical period of succession and a significant change during succession is the potential dispersion of fam-ily ownership and control.This paper empirically analyzes the impact of structural tools on the TFP of family businesses,providing theoretical and empirical evidence for the application of structural tools in the governance of Chinese family suc-cession and the formulation of related policies.
Structural ToolFamily ControlFamily Business TriangleTotal Factor Productivity
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