Political connection and business transformation in family firms:evidence from China

Wang, Delu and Ma, Gang and Song, Xuefeng and Liu, Yun (2016) Political connection and business transformation in family firms:evidence from China. Journal of Family Business Strategy, 7 (2). pp. 117-130. ISSN 1877-8585

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We investigate the impact of family ownership on core business transformation and the moderating role of political connections in this relation through a Probit model, conditional Logit model, and Heckman selection model with instrumental variable using data from Chinese listed companies covering 2001–2010. The results demonstrate that, compared with non-family firms, family firms are more likely to transform their core business, enter strongly correlative industries and non-regulated industries, and adopt a mergers and acquisitions (M&A) mode. Furthermore, compared with politically non-connected family firms, family firms with political connections are more likely to conduct business transformation and adopt M&A rather than an internal cultivation mode to realize transformation. In addition, political connections make family firms more likely to enter weakly correlative industries and increase their chances of entering government-regulated industries.

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Journal Article
Journal or Publication Title:
Journal of Family Business Strategy
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This is the author’s version of a work that was accepted for publication in Journal of Family Business Strategy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Family Business Strategy, 7, 2, 2016 DOI: 10.1016/j.jfbs.2016.05.001
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Deposited On:
09 Aug 2016 12:14
Last Modified:
22 Nov 2022 03:20