Are family managers in Chinese family businesses agents or stewards? the impacts of corporate governance on the performance of Chinese family businesses, and the moderating effects of leadership styles

摘要

Drawing on agency theory, stewardship theory, and transformational leadership theory, this thesis investigated three research questions: Do CFBs implement control-oriented governance mechanisms towards their family managers? If they do, how do these control-oriented governance mechanisms influence CFBs’ financial performance? Would CFB owners’ leadership style influence the effect of control-oriented governance mechanisms on CFBs’ financial performance? The study of 186 family businesses operating in seven major cities of China's eastern-coastal and inland regions has identified three key findings. First, the sampled CFBs govern their family managers with control-oriented governance mechanisms that are widely practised in western business contexts. Second, these governance mechanisms significantly improve CFBs’ financial performance. Third, the identified governance-performance relationship is negatively moderated by the leadership style of CFB owners. These findings suggest that family managers in CFBs behave more as agents than stewards. That is, they tend to be self-serving and work for their own interests at the expense of their CFB owners and their family businesses. However, transformational owners in CFBs can reduce the agent-like behaviour of family managers, with the contribution of control-oriented governance mechanisms to firm performance decreasing under transformational leadership. The negative moderating effect also seems to suggest that transformational leadership and control-oriented corporate governance have substitute effects on firm performance.The contributions of the thesis can be summarized as follows. Academically, the findings have enhanced our understanding of governance practices and leadership styles currently practised in family businesses in China; reinforced the relevance of dominant theoretical perspectives – agency and stewardship – to the understanding of family managers in a strong Confucian culture; and addressed the contradictory predictions of two competing theories by bringing a moderator (leadership style) into the model. Practically, the findings have shown that establishing control-oriented governance mechanisms in CFBs may work as a temporary measure to address agency problems, with transformational leadership presenting potentially greater value in CFBs. All in all, given the family business sector's rising significance in China and the paucity of empirical research on the sector, this thesis not only addresses the empirical void but also enriches our understanding of corporate governance practices in context.