Research on the Relationship and Transmission Mechanism between Internal Governance Structure and Wealth Management Decisions in Family Enterprises

Zhilin Zhang; Chunlu Lan; Binwei Zhang

doi:10.71222/52nmrj90

Authors

Zhilin Zhang Academy of Management Sciences, Universidade Politécnica de Macau Macao Polytechnic University, Macao, China Author
Chunlu Lan Universidade Politécnica de Macau Macao Polytechnic University, Macao, China Author
Binwei Zhang Academy of Management Sciences, Universidade Politécnica de Macau Macao Polytechnic University, Macao, China Author

DOI:

https://doi.org/10.71222/52nmrj90

Keywords:

family business, internal governance, wealth management, decision making, succession planning

Abstract

Family enterprises play a vital and indispensable role in the global economy, serving as primary drivers of economic growth, innovation, and employment generation, especially within emerging markets where family control remains highly prevalent. The internal governance structures of these organizations significantly influence their strategic decision-making processes, particularly in critical areas related to wealth preservation, capital investment, risk mitigation, and long-term succession planning. This comprehensive study investigates the intrinsic relationship between the internal governance architecture of family firms and their subsequent wealth management decisions. Furthermore, it systematically explores the underlying transmission mechanisms through which specific governance characteristics—such as ownership distribution, board of directors composition, executive leadership frameworks, and cross-generational involvement—directly affect corporate financial strategies and overarching long-term wealth objectives. By meticulously unpacking these complex organizational dynamics, the research provides a robust conceptual framework for understanding how internal structural configurations shape wealth-related choices and asset allocation in family businesses. Additionally, the findings offer valuable practical insights for family business owners, corporate policymakers, and financial advisors seeking to optimize governance frameworks to ensure sustainable wealth accumulation and seamless intergenerational transitions. Ultimately, this paper contributes to the broader academic discourse on corporate governance by highlighting the unique financial behaviors of family-owned entities and proposing actionable strategies to enhance their economic resilience and competitive advantage in rapidly evolving global markets.

References

1. H. T. Chiang and M. C. Lin, "Examining board composition and firm performance," The International Journal of Business and Finance Research, vol. 5, no. 3, pp. 15-27, 2011.

2. H. Farrell and A. Héritier, "Formal and informal institutions under codecision: continuous constitution‐building in Europe," Governance, vol. 16, no. 4, pp. 577-600, 2003.

3. B. Duriez and B. Soenens, "The intergenerational transmission of racism: The role of right-wing authoritarianism and social dominance orientation," Journal of Research in Personality, vol. 43, no. 5, pp. 906-909, 2009.

4. D. J. Weitzner, H. Abelson, T. Berners-Lee, J. Feigenbaum, J. Hendler, and G. J. Sussman, "Information accountability," Communications of the ACM, vol. 51, no. 6, pp. 82-87, 2008.

5. M. Cull, "The rise of the financial planning industry," Australasian Accounting, Business and Finance Journal, vol. 3, no. 1, 2009.

6. J. A. Davis, M. M. Hampton, and I. Lansberg, Generation to Generation: Life Cycles of the Family Business. Harvard Business Press, 1997.

7. B. Crona and Ö. Bodin, "Power asymmetries in small-scale fisheries: a barrier to governance transformability?," Ecology and Society, vol. 15, no. 4, 2010.

8. M. Crumpacker and J. M. Crumpacker, "Succession planning and generational stereotypes: should HR consider age-based values and attitudes a relevant factor or a passing fad?," Public Personnel Management, vol. 36, no. 4, pp. 349-369, 2007.

9. O. K. Hope, J. C. Langli, and W. B. Thomas, "Agency conflicts and auditing in private firms," Accounting, Organizations and Society, vol. 37, no. 7, pp. 500-517, 2012.

10. L. P. Steier, J. J. Chrisman, and J. H. Chua, "Governance challenges in family businesses and business families," Entrepreneurship Theory and Practice, vol. 39, no. 6, pp. 1265-1280, 2015.

11. M. Mustakallio, E. Autio, and S. A. Zahra, "Relational and contractual governance in family firms: Effects on strategic decision making," Family Business Review, vol. 15, no. 3, pp. 205-222, 2002.

12. M. H. Lubatkin, W. S. Schulze, Y. Ling, and R. N. Dino, "The effects of parental altruism on the governance of family‐managed firms," *Journal of Organizational Behavior: The International Journal of Industrial, Occupational and Organizational Psychology and Behavior*, vol. 26, no. 3, pp. 313-330, 2005.

13. R. Huacca-Incacutipa, R. A. J. F. Argandoña, L. W. M. V. Pérez, and A. Nuñez-Vizcarra, "Internal control and corporate governance in family businesses: A review of studies and approaches from a Latin American perspective," Journal of Pharmaceutical Negative Results, vol. 13, no. 4, pp. 666-675, 2022.