Business, Management and Accounting
3 years ago

Foreign ownership boosts investments in family firms facing financial constraints.

SSRN Electronic Journal
Does Mobility of Corporate Governance Reduce Financial Constraints Issues in Family Controlled Firms
Ei Yet Chu, Saw-Imm Song, Tian So Lai

Paper Summary

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The article explores how foreign ownership can improve corporate governance in family firms facing financial constraints. The study focuses on Malaysian family firms with low cash flow and finds that these firms struggle with low investments due to financial constraints. CEO duality and independent directors do not effectively address financing issues. Foreign ownership can enhance corporate governance, especially when their stake is less than 11% and large shareholders' interest is less than 15%. The relationship between foreign ownership and large shareholders is complex, with improvements seen when large shareholders' interest is less than 10% or more than 40%.