Confucianism and the altruistic behaviour in the succession of family firms: evidence from asset write-downs

Abstract

This paper explores how Confucianism influences the altruistic behaviour during family firm successions. Using a sample of Chinese listed family firms which have transferred the power to family successors during 2005-2018, we find that family firms deeply influenced by Confucianism intend to take a big bath via asset write-downs in the year before the succession. Confucianism has stronger influence on altruism when the successor have closer blood relationship with the founder, when the successor is less educated, when the family have weaker control over the firm or when the firm is in a lower market position. When the board of directors is more independent or the auditor has higher reputation, the influence of Confucianism is weaker. Family firms with more asset write-downs have better short-term performance after the succession, but lower business reform and R&D inputs. These findings enrich the research on Confucianism and corporate governance of family firms.