Abstract:

As a control strengthening mechanism， excess family board seats will enable the controlling family to make risk decisions according to their wishes， which may affect the risk-taking level of family firms. As a matter of fact， the responsibility for the failure of the board decision is often shared by all shareholders， while the benefits obtained from the successful decision are decided and distributed by the controlling family， which makes the family have the motivation to choose high-risk and high-yield investment projects， so as to obtain the private benefits of control rights. When the degree of excess control of family board seats is higher， the independence of board is usually lower. At this time， the controlling family is more motivated and able to obtain private benefits of control rights by investing in the above-mentioned high-risk projects， which makes the family firms face higher operating risks， furthermore leading to an increase in the level of corporate risk-taking.To verify the above inferences， a sample of family firms listed on Shanghai and Shenzhen A-shares is selected through the sub-database of private listed companies in the CSMAR database， and key data such as the number of family directors and family control rights are manually collected. Other corporate governance data and financial data come from the CSMAR database and the RESET database. The sample period is from December 31， 2008， to December 31， 2017. The independent variable excess control degree of family board seats （ECFBS） is measured as the difference between the proportion of boardseats controlled by the family and the family control rights. The risk-taking level of the dependent variable is represented by Risk， which is characterized by the rolling range and rolling standard deviation of Roa in the next three years. In addition， three moderator variables are introduced： controlling shareholder equity pledge （Pledge_dum， Pledge）， company information transparency （Transparency）， and institutional shareholding ratio （InsHold）. On this basis， the mechanism and effect of the excess control of family director seats on the risk-taking level of corporate are examined.It is found that the degree of excess control of family board seats is significantly positively correlated with the level of corporate risk-taking. Further analysis finds that the controlling shareholder’s equity pledge will weaken the positive correlation between the degree of excess control of family board seats and thelevel of corporate risk-taking； Higher corporate information transparency or institutional shareholding ratio will reduce the positive impact of excess control degree of family boardseatson the level of corporate risk-taking.The mechanism analysis shows that the controlling family’s acquisition of private benefits of control rights is an important mechanism for the excess control of family board seats to affect the level of corporate risk-taking.Finally， after controlling for potential endogeneity problems and conducting a series of robustness tests， the research conclusions still hold. It not only enriches the relevant research on the economic consequences of excess control of family board seats but also provides more explanations for the venture capital behavior of family firms in this paper.

Key words: family firms, excess control of family board seats, risk-taking