Study On Relationship Between Internal Governance And Performance Of Chinese Family Holding Listed Companies

Currently, the Chinese family holding listed companies have become an important part of China’s socialist market economy, and also is a bright spot in the economic growth. However, with increasing number of family holding listed companies, the political, legal and social environment of family holding listed companies become more complicated than ever before. More and more entrepreneurs begin to realize the problems of internal normative management, governance structure and development quality have become major bottleneck in the further development of family holding listed companies. In order to achieve sustainable development and realize rapid and healthy development, it is necessary for family holding listed companies to regulate their internal governance mechanisms and make innovations for the internal governance mechanisms. Therefore, study on Chinese family holding listed companies based on dual performance evaluation criteria of the company’s economic interests and social responsibility is necessary, especially the issue of the ownership structure arrangements, professionalism management and incentive and restraint mechanism of internal governance are all very urgent issues.Firstly, on the basis of review of the existing literature, the author combed the governance characteristics of Chinese family holding listed companies, then built dual performance evaluation system. Then the author summarized the theoretical basis of the relationship between internal corporate governance and corporate performance from the transaction cost theory, agency theory, stakeholder theory and incentive theory, accordingly, association model of internal governance and corporate dual performance was constructed. Then, using the operating data of Chinese family holding listed companies, the author selected key governance elements from the aspects of equity structure arrangements, board of directors governance and management incentive to make empirical analysis on relationship between corporate governance and corporate performance. Then at last drew the following conclusions:(1) ownership structure arrangements of Chinese family holding listed companies has relationship with corporate performance:there is negative correlation between ownership concentration and corporate social performance, there is a positive correlation between the economic performance and ownership structure arrangements; equity balance degree has significant positive relations with corporate social performance, there is non-significant negative correlation between equity balance degree and corporate economic performance; negative correlation between ownership separation degree and corporate social performance is not significant, negative correlation between ownership separation degree and economic performance of enterprises is significant.(2) Relationship between board of directors governance and corporate performance of Chinese family holding listed companies:there is a positive correlation between the Board of directors size and corporate social performance, there is non-significant negative correlation between the board of directors size and economic performance; negative correlation exists between Chair-CEO duality leadership structure and corporate social performance, there is a positive correlation between Chair-CEO duality leadership structure and economic performance of enterprise; independent director proportions has both positive correlation with corporate social performance and economic performance; number of committees has both positive correlation with corporate social performance and economic performance; there is a positive correlation between number of board of directors meetings and corporate social performance and economic performance, but the correlation was not significant;(3) relationship between Chinese family holding listed companies incentive and corporate performance: management equity incentive and corporate performance:"U"-type relationship exists between management equity incentive and corporate social performance and economic performance; positive relationship exists between management compensation incentive and corporate performance; significant positive correlation exists between management job consumption and corporate social performance, but non-significant negative correlation exists between management job consumption and corporate economic performance.According to the above conclusions, the author divided the internal corporate governance factors into superior elements, inferior elements and contingency factors, then the author constructed dual performance optimization model to improve internal governance, and the corresponding recommendations were put forward:First, to strengthen superior governance elements which are in favor of dual performance improvement, specifically including increasing proportion of independence directors, to enhance capability and motivation of the independent directors in corporate governance; to increase the number of professional committees in board of directors to promote standardization of professional committees set; to increase board of directors meeting frequency to improve the quality of board of directors meeting; scientifically design of management incentive compensation system, improve the level of management incentive compensation. Secondly, it is necessary to inhibit the poor quality governance factors, that means to optimize the pyramid structure and reduce the separation degree of control rights and cash flow rights. Finally, to improve control of contingency factors which affected the dual governance performance improvement, including optimize equity structure according to the development stage of the company and the market environment; maintaining a reasonable size of the board of directors, making contingency selecting arrangements for leadership structure, finding a balance between diversity and decision-making efficiency in board of directors resources; to maintain a reasonable level of control incentive, and improve job consumption restraint mechanisms; to understand the reasonable boundaries of management equity incentive, to strengthen the long-term characteristics and restrictive characteristics of equity incentive, to maximize the positive effects of equity incentives.Of course, this study also has some limitations, such as accuracy of selection of measurement indicators of key variables, study on relationship between corporate social performance and economic performance, and adding other types of listed companies to make comparisons with family holding listed companies on internal governance and performance, these issues are worthy of further exploration in future research and analysis.