The Research On The Adjustment Of Investment Strategy Of Intergenerational Inheritance Of Listed Family Business In China

Over the past 40 years of reform and opening up,the private sector has grown from small to large,from weak to strong and flourished.It has not only created one economic miracle after another,but also contributed indelibly to sustained and stable economic growth,employment and innovation.General Secretary Xi once used the term "56789" to summarize the achievements of private enterprises.That is,the private economy contributes more than 50% of tax revenue,more than 60% of GDP,more than 70% of technological innovation,more than 80% of urban employment,more than 90% of the number of enterprises.This is the recognition and full affirmation of the status and role of private economy in the development of national economy.As a barometer to test the achievements of China’s reform and opening up,the private economy not only contributes an important force in maintaining social stability,but also is an important way for the country and people to achieve prosperity,and it is also an important source for the vitality of China’s market economy."Without private enterprises,the economy is unstable,not rich,and not full of vitality",private economy is the important force behind China’s economic miracle.As an important part of the private economy,in the wave of reform and opening up,a large number of outstanding Chinese family businesses and entrepreneurs have emerged.The 40-year history of rapid economic development in China is also the history of rapid development of Chinese family businesses.Based on family unity,innovative spirit,entrepreneurial spirit and dedication of family members,family enterprises have survived and developed tenacious in the fierce international and domestic market competition,and now they have developed into an important part of China’s private economy.However,people’s negative views on family business have always existed.Closed,backward and low efficiency once became synonymous with family business.For a long time,people have ignored the important contribution of family business to China’s economic development as an important part of the private economy,and the research on the problems in the development of family business is also very insufficient,which is not conducive to the benign development of family business.As a combination of family(social organization)and enterprise(economic organization),Chinese family busineses have the characteristics of both kinds of organizations.In the decision-making process of business operation,they should not only realize the general economic goals,but also protect the emotional wealth of the family and realize the goal of evergreen family business.Eternity is the common pursuit of human beings.Driven by this instinctive pursuit,long-running organizations and those century-old enterprises all exude attractive charm.Compared with the eternity of the family business organization,the entrepreneur’s life is limited.After decades of development,a generation of entrepreneurs has gradually entered their sixties.In order to realize the vision of sustainable operation and "evergreen foundation" of family businesses,family businesses have ushered in the peak period of succession from the first generation of founders to the second generation of successors.According to the research statistics of Birley(1986)[1],only30% of family businesses can successfully realize the inheritance from the first generation to the second,while only 12% of family businesses extend from the second to their third.Family businesses that can become century-old are even rarer.The mantra of "the first generation starts a business,the second generation keeps the business,and the third generation failing",and the mantra of "no wealth lasts for three generations ",truly reflects the high failure reality of family business inheritance.At the same time,in the context of industrial transformation and upgrading encouraged by the government,Chinese family businesses,which are mainly based on traditional manufacturing,used to rely on cheap labor and consumption of resources for development,but this growth model limits the sustainable development ability of enterprises.Huawei’s success has given many family entrepreneurs a head-on rebuke,no core competitiveness of the enterprise has no future.In the face of internal intergenerational inheritance and external transformation and upgrading,Chinese family businesses urgently need to seize the opportunity of this inheritance,carry out investment strategy reform,determine future development direction and focus,realize enterprise transformation and upgrading,and acquire long-term development capacity.The intergenerational inheritance of family businesses is not only the transfer of positions and wealth,but also a dynamic and complex socialization process.It can take as short as 3-5 years or as long as 10-20 years,which is crucial to the survival of enterprises.In this paper,the second generation participates in the operation and management of the enterprise as department managers,senior executives or members of the board of directors,while the founder still holds the management and decision-making power of the enterprise,which is confirmed as the starting point of intergenerational inheritance.This is the period of two-generation governance(father-son governance stage).If the founder’s children serve as the CEO or chairman of the board of directors of the enterprise and have the management and decision-making power of the enterprise,and the father’s founder steps down from the management of the enterprise,it is regarded as the completion of the succession(the stage of child autonomy).This paper argues that Chinese listed family enterprises under intergenerational inheritance include the stage of father-son co-governance and the stage of offspring autonomy,while the stage in which the father manages the enterprise alone indicates that the family enterprises do not have intergenerational inheritance.Inheritance does not mean simple inheritance and succession.With the continuous promotion of intergenerational inheritance,enterprises will usher in the era when the successor takes power.The alternation of power,the change of internal and external environment,both will have an impact on the reform of enterprise investment strategy.The difference between the two generations will be significantly reflected in the choice of enterprise investment strategy.Based on the investment theory,stewardship theory,upper echelons theory,social emotional wealth theory and authority theory,this paper takes family business intergenerational inheritance as the context,taking Chinese listed family enterprises from 2007 to 2019 as research samples,literature review and empirical research as methods.From the perspective of the characteristics of corporate investment strategy adjustment under intergenerational inheritance,the adjustment of mergers and acquisitions(M&A)investment behavior and the impact of investment strategy adjustment on corporate performance,this paper examines the effects of general capital expenditure adjustment,innovation expenditure adjustment,and investment scale and quantity change of M&A investment strategy adjustment on corporate performance under intergenerational inheritance of Chinese listed family firms.The main conclusions are as follows:First of all,we explore the adjustment of general capital expenditure and innovation expenditure of Chinese listed family enterprises under the intergenerational inheritance,hoping to grasp whether the investment strategy of family enterprises under the intergenerational inheritance is adjusted and the direction of adjustment.The research shows that under the intergenerational inheritance,the general capital expenditure of listed family firms in China will continue to adjust upward,and the intergenerational inheritance also significantly promotes the upward adjustment of innovation expenditure.Generational differences also affect the adjustment of general capital expenditure and innovation expenditure of inherited family firms.Specifically,when there is no difference in overseas experience between father and son,the educational level difference between the two generations is low and the two generations are politically connected,the general capital expenditure adjusts significantly upward under intergenerational inheritance;However,when the two generations have different overseas experience,higher educational level difference,and no political connection between the two generations,the innovation expenditure under intergenerational inheritance is significantly adjusted upward.According to the different stages of inheritance,the research finds that in the father-son co-governance stage,the general capital expenditure of Chinese listed family firms is significantly adjusted upward;In the stage of offspring autonomy,innovation expenditure of Listed family firms in China shows a significant upward adjustment.Secondly,from the perspective of the realization of investment strategy adjustment,this paper studies the adjustment of the amount and scale of M&A investment under the intergenerational inheritance of family enterprises.From the perspective of realization mode,it is found that the adjustment of investment strategy under intergenerational inheritance is mainly based on self-investment(general capital expenditure and innovation expenditure),but inhibits the quantity and scale of M&A investment.Generational differences also affect the changes in the amount and scale of M&A investment of family enterprises under inheritance.Specifically,when there is no difference in overseas experience between two generations,higher educational level difference,when the parents have political connections but the children don’t or both two generations don’t have political connections,the number and scale of M&A investment of family enterprises will decrease significantly under intergenerational inheritance.According to different stages of inheritance,the research finds that in the father-son co-governance stage,the number and scale of m&a investment of family enterprises under intergenerational inheritance will significantly decrease.Finally,according to the same industry M&A or cross-industry M&A,the research results show that the number and scale of cross-industry M&A initiated by Chinese listed family enterprises are significantly reduced under the intergenerational inheritance,while the adjustment of cross-industry M&A investment behavior is not significant.Finally,this paper examines the impact of investment strategy adjustment on firm performance under intergenerational inheritance.Under the intergenerational inheritance,the adjustment of general capital expenditure and innovation expenditure of family enterprises will improve the enterprise performance,while the adjustment of M&A quantity and scale will weaken the enterprise performance.Intergenerational differences also affect the impact of investment strategy adjustment of inherited family enterprises on corporate performance.Specifically,when there is no difference in overseas experience between father and son,the educational level difference between the two generations is low and the two generations have no politically connections,general capital expenditure adjustment can significantly improve the performance of enterprises under the intergenerational inheritance;When there is no difference in overseas experience between two generations,higher educational level difference and political connection difference,the upward adjustment of enterprise innovation expenditure under intergenerational inheritance can significantly improve enterprise performance.When the two generations have differences in overseas experience,educational background and political connection,the adjustment of the amount and scale of M&A investment under intergenerational inheritance will damage the business performance of the enterprise.According to the different stages of inheritance,it is found that in the stage of offspring autonomy,the adjustment of general capital expenditure and innovation expenditure has a positive effect on enterprise performance,and the adjustment of M&A scale has a significant negative effect on enterprise performance.However,in the father-son co-governance stage,the adjustment of innovation expenditure of family enterprises under intergenerational inheritance will inhibit the improvement of enterprise performance,and the adjustment of the number and scale of M&A investment of family enterprises will significantly damage enterprise performance.This study contributes to the existing literature in several ways.Firstly,this paper makes an in-depth discussion on the investment strategy adjustment of Chinese listed family business under intergenerational inheritance.Compared with existing literature,this paper systematically studies the changes of general capital expenditure adjustment,innovation expenditure adjustment,and the quantity and scale of M&A investment under intergenerational inheritance.Secondly,the measurement of this indicators are more pure and direct.The adjustment of investment strategy can be measured by the difference of investment expenditure between the current year and the last year,and the adjustment of investment strategy of Chinese family business can be better demonstrated by excluding the influence of industry adjustment,and the influence of intergenerational inheritance on the adjustment of investment strategy of family business can be more intuitively revealed.Thirdly,based on the perspective of the realization of investment strategy adjustment,this paper finds that the amount and scale of M&A investment of Listed family business in China are significantly adjusted downward under generational inheritance,and the adjustment of investment strategy of family business is mainly realized through self-investment.Fourthly,from the perspectives of overseas experience,education level and political connection,this paper deeply reveals the different influences of the differences between father and son on the investment strategy adjustment of family business under the intergenerational inheritance.As the founder of the family business,the father has played an indelible role in promoting the development of the family business.In order to gain organizational recognition,improve authority and legitimacy,and establish their own business territory,the second generation of heirs should not completely deny and abandon the business founded by their parents,but should better play the role of the main business in ensuring a smooth transition of the family business.Innovation can promote the long-term development of the enterprise,help the family business to realize the bright prospect of "everlasting foundation".It is also an important way for the successors of the second generation to highlight their talents.In the process of intergenerational inheritance of family business,there is no conflict between "innovation" and"preservation",starting a business without the support of your main business is like building castles in the air,which simply inherits the family business without seeking innovative development is also difficult to achieve "sustainable operation".Only by developing hand in hand in the process of “preservation” and “innovation" can we realize the vision of "evergreen foundation" and the good wish of building a century-old family business.