Favoritism or Equality? Structural Power Configuration of Executives and Long-term Investment in Family Businesses

Yan Ruosen; Zhao Yali

doi:doi:10.16538/j.cnki.fem.20220809.102

Summary

The family business has become an active economic growth point in China’s national economy, but the problems of governance and investment are the key factors restricting the development of family businesses. As the makers and executors of decision-making, executives have an impact on long-term investment such as R&D expenditure and capital expenditure, which are related to the survival and development of family businesses. In addition, considering that the structural power of executives directly affects the efficiency of resource allocation and the actual distribution of interests, then, along with the non-family executives gradually participate in the management of family businesses, how to allocate the structural power of family executives and non-family executives to ensure the scientific decision-making and realize the long-term development of family businesses becomes very important. In general, family businesses may adopt the differentiated executive structural power configuration mode of “favoritism” or the balanced executive structural power configuration mode of “equality”. However, for the long-term investment in pursuit of the long-term survival and development of businesses, it is worth discussing whether family executives and non-family executives should be treated as “favoritism” or “equality”.

In this connection, taking A-share listed companies in Shanghai and Shenzhen stock exchanges from 2012 to 2019 as samples, this paper empirically studies the impact of executive structural power configuration on the long-term investment of family businesses. The results show that: (1) The executive structural power configuration mode of “favoritism” cannot significantly promote the long-term investment of family businesse. Specifically, the “thick” structural power configuration of family executives and the “thin” structural power configuration of non-family executives have no significant impact on the long-term investment of family businesses, and the “thick” structural power configuration of non-family executives and the “thin” structural power configuration of family executives can significantly inhibit the long-term investment of family businesses. (2) The executive structural power configuration mode of “equality” can significantly promote the long-term investment of family businesses. Mechanism test results show that the promotion effect of executive structural power equality on the long-term investment of family businesses is achieved mainly through improving the long-term goal orientation of executives and the heterogeneity of top management team. Further research results also show that the executive structural power configuration mode of “equality” can promote the long-term investment of family businesses more significant in growth and maturity periods or in the markets with higher competition.

The possible contributions of this paper are as follows: (1) It examines the relationship between the structural power configuration of executives and the long-term investment of family businesses from the perspective of the structural power configuration of family executives and non-family executives, and reveals the relevant mechanisms, so as to enrich the related research on family business governance. (2) The existing research on “bifurcation bias” is still at the theoretical level, while this paper indirectly deepens and expands the research on “bifurcation bias” of family businesses from the empirical level. (3) It also enriches the exploration of the factors influencing the long-term investment of family businesses from the perspective of the structural power configuration of executives. (4) It discusses the differences in the impact of executive structural power configuration on the long-term investment of family businesses in different life cycle stages and market competition, thereby extending the applicable context of the research conclusions of this paper.