Sibling co-management and cost of capital: Evidence from Chinese listed family firms

IF 7.2 1区经济学 Q1 BUSINESS, FINANCE

Journal of Corporate Finance Pub Date : 2024-10-28 DOI:10.1016/j.jcorpfin.2024.102690

Nianhang Xu , Danwen Song , Rongrong Xie , Kam C. Chan

{"title":"Sibling co-management and cost of capital: Evidence from Chinese listed family firms","authors":"Nianhang Xu , Danwen Song , Rongrong Xie , Kam C. Chan","doi":"10.1016/j.jcorpfin.2024.102690","DOIUrl":null,"url":null,"abstract":"<div><div>We study whether sibling co-management affects the cost of capital for family firms in China. We find that sibling co-management strongly correlates with a lower cost of capital. We identify three mechanisms through which sibling co-managers (including directors) influence the cost of capital: providing coinsurance, enhancing corporate governance, and facilitating communication with investors. Furthermore, the effect is more pronounced for firms operating in regions with weaker legal environments and firms with auditors from non-Big 4 accounting firms. However, sibling co-management may also hinder external financing due to higher uncertainty during family power transfer periods. In addition, the value of sibling co-management is more salient for financially constrained firms and those in which at least one of the co-manager siblings has a finance background. Overall, the findings suggest that family firms benefit from sibling co-management, resulting in a lower cost of capital, despite the challenges that arise during family power transfer.</div></div>","PeriodicalId":15525,"journal":{"name":"Journal of Corporate Finance","volume":"89 ","pages":"Article 102690"},"PeriodicalIF":7.2000,"publicationDate":"2024-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Corporate Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0929119924001524","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

We study whether sibling co-management affects the cost of capital for family firms in China. We find that sibling co-management strongly correlates with a lower cost of capital. We identify three mechanisms through which sibling co-managers (including directors) influence the cost of capital: providing coinsurance, enhancing corporate governance, and facilitating communication with investors. Furthermore, the effect is more pronounced for firms operating in regions with weaker legal environments and firms with auditors from non-Big 4 accounting firms. However, sibling co-management may also hinder external financing due to higher uncertainty during family power transfer periods. In addition, the value of sibling co-management is more salient for financially constrained firms and those in which at least one of the co-manager siblings has a finance background. Overall, the findings suggest that family firms benefit from sibling co-management, resulting in a lower cost of capital, despite the challenges that arise during family power transfer.

查看原文本刊更多论文

兄弟姐妹共同管理与资本成本：来自中国上市家族企业的证据

我们研究了兄弟姐妹共同管理是否会影响中国家族企业的资本成本。我们发现，兄弟姐妹共同管理与较低的资本成本密切相关。我们发现兄弟姐妹共同管理（包括董事）影响资本成本的三个机制：提供共同保险、加强公司治理以及促进与投资者的沟通。此外，对于在法律环境较弱地区经营的公司以及审计师来自非四大会计师事务所的公司，这种影响更为明显。然而，由于家族权力交接期间的不确定性较高，兄弟姐妹共同管理也可能阻碍外部融资。此外，兄弟姐妹共同管理的价值对于财务紧张的企业和共同管理人中至少有一人具有金融背景的企业更为突出。总之，研究结果表明，尽管在家族权力转移过程中会出现一些挑战，但家族企业仍能从兄弟姐妹共同管理中获益，从而降低资本成本。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Corporate Finance BUSINESS, FINANCE-

CiteScore

11.80

自引率

3.30%

发文量

期刊介绍： The Journal of Corporate Finance aims to publish high quality, original manuscripts that analyze issues related to corporate finance. Contributions can be of a theoretical, empirical, or clinical nature. Topical areas of interest include, but are not limited to: financial structure, payout policies, corporate restructuring, financial contracts, corporate governance arrangements, the economics of organizations, the influence of legal structures, and international financial management. Papers that apply asset pricing and microstructure analysis to corporate finance issues are also welcome.