The Power of Women: Does Husband-and-Wife Co-governance Inhibit Tunneling?

Xu Yupeng; Cheng Bo; Pan Fei

doi:doi:10.16538/j.cnki.fem.20210508.202

Summary

The existing literature shows that under the background of Chinese cultural tradition and economic institution, the institutional protection of investors is not yet mature, and the family business often presents the characteristics of the combination of ownership and management rights. This may not only cause the “supervision effect” under the centralized control right, but also lead to the “encroachment effect”. The former believes that the family business has the ability to mitigate or even eliminate family favoritism and weak risk-taking, which will harm the efficiency, performance and even survival of family business. The family business is more concerned about reputation, showing a higher performance of internal governance. The “encroachment effect”, on the other hand, holds that the family actual controller has a high opportunist motive, and the corporate decision-making operates entirely under the will of individual authoritativeness, which increases the risk of the expropriation of small and medium-sized shareholders, creditors and other external stakeholders. The loss of corporate governance quality and the shrinking of corporate value are brought about by the means of capital occupation, high related party transaction and special dividend policy. However, the existing research does not distinguish between husband-and-wife co-governance and family business co-governance formed by other kinship. The existence of husband-and-wife co-governance family business, which accounts for one third of the listed family companies in China, has brought a unique opportunity for this paper to study the corporate governance of family business. Compared with other family ties, husband-and-wife co-governance presents different characteristics in terms of goals, management methods, and communication and coordination in daily business activities. So, the husband-and-wife co-governance family business has more obvious opportunistic behavior of encroaching on non-family stakeholders, or less “tunneling” behavior? The exploration on this problem will help the academia and the industry to have a more rational and in-depth understanding of the impact of husband-and-wife co-governance on the survival and development of family business.

In view of this, this paper takes A-share listed family enterprises as samples to empirically test the impact of husband-and-wife co-governance family business on corporate interest encroachment. It is found that, compared with other types of family business, the husband-and-wife co-governance family business has less encroachment behavior. After a series of robustness tests, the conclusion is still valid. Further research on the influence mechanism shows that, the wife’s human capital trait and the trait of endowing her with internal and external power have a significant “supervision effect” on corporate interest encroachment behavior, which highlights the governance ability of female entrepreneurs.

Compared with the previous literature, the contributions of this paper are as follows: Firstly, it enriches the research on family involvement and corporate governance behavior of family business, and expands the research boundary of the corporate governance theory of family business, which provides new evidence and ideas for opening the “Black Box” of the internal governance of family business. Secondly, it expands the research on marriage economics, feminism and family entrepreneur behavior theory; in the context of Chinese culture and society, it makes a detailed study on the “flexible” synergic function of female entrepreneurs in husband-and-wife co-governance, and the positive effect of female entrepreneur governance.