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The Coupling of Ownership and Control and the Allocation of Financial Resources: Evidence from Hong Kong
Author(s) -
Carney Michael,
Gedajlovic Eric
Publication year - 2002
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/1467-6486.00285
Subject(s) - control (management) , extant taxon , business , corporate governance , incentive , market liquidity , foreign ownership , profitability index , capital allocation line , dividend , accounting , finance , economics , market economy , foreign direct investment , macroeconomics , management , evolutionary biology , biology
Theoretical and empirical research regarding the impact of corporate ownership on the behaviour and performance of firms have typically focused on consequences stemming from the separation of ownership and control. While large scale business enterprise characterized by such a separation is dominant in the US, Japan and the UK, firms in which ownership and control is coupled in the hands of individuals and their families are apparent in many other large developed economies and are dominant in most emerging markets. This paper examines consequences regarding the generation and allocation of financial resources stemming from the coupling of ownership and control among Hong Kong based firms. In doing so, we join insights from the economics literature regarding the incentive and risk bearing consequences of coupled ownership and control with the extant management, sociology and history literatures regarding Chinese family business groups and develop and six hypotheses pertaining to patterns in the allocation of financial resources. Results indicate that coupled ownership and control is positively related with dividend payout levels and financial liquidity while it is negatively related to investments in capital expenditures. Consistent with these results, we also find that coupled ownership and control is positively related to short‐term (accounting) profitability.