Family Control, Information Transparency and Cost of Equity for Family Firms

Abstract

Abstract:

From the perspective of socioemotional wealth and information asymmetry theory, we investigate the impact of corporate transparency on the cost of equity of family firms, intervened by levels of marketization. The results show that (1) the higher the family involvement, the higher the cost of equity; (2) corporate transparency could weaken the effects of family control on the cost of equity. Furthermore, different from an advanced capital market, marketization has a substitution effect on the corporate transparency; and (3) the three-way interactions among marketization, family control and information transparency present significant relationship with cost of equity. It means that the negative impact of information transparency on the cost of equity will become weaker as marketization increases. The results provide evidence for improving corporate transparency, establishing regulatory authorities, and matching between information disclosure and marketization in China.

Key words: family control, information transparency, marketization, cost of equity

Guo Jiaqi, Li Changhong, Jiao Wenting, Wang Zhan. Family Control, Information Transparency and Cost of Equity for Family Firms[J]. , 2019, 31(9): 47-57.

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