Shareholding arrangement within controlling family and ESG performance: Insights from succession planning in Chinese family businesses

This study examines how share allocation strategies during intergenerational succession affect the Environmental, Social, and Governance (ESG) performance of Chinese family businesses. Using data from 207 publicly listed Chinese family firms spanning 2009 to 2016 (totaling 1277 firm-year observations), we analyze the impact of the proportion and concentration of shares allocated to second-generation heirs on ESG outcomes. We apply a theoretical framework that integrates socioemotional wealth (SEW), agency, stewardship, and stakeholder theories to understand the role of equity allocation decisions in shaping firms' sustainability priorities. Our results indicate that increasing heirs' share proportions positively enhance ESG performance, while higher share concentration among family members negatively affects ESG outcomes. These findings remain consistent after multiple robustness checks and corrections for endogeneity. Furthermore, we demonstrate that traditional familism culture moderates these relationships, particularly influenced by founder characteristics, heirs' background, and the separation between ownership and management. This research provides new insights into the importance of internal share allocation decisions and cultural factors in promoting sustainable practices. Our findings contribute to existing literature by integrating multiple theoretical perspectives and offer practical guidance for family businesses and policymakers in China.