The Theoretical Analysis of the Allocation of Family Control Rights B Oc10/17

Open Journal of Business and Management, 2014, 2, 314-320 Published Online October 2014 in SciRes. http://www.scirp.org/journal/ojbm http://dx.doi.org/10.4236/ojbm.2014.24037 The Theoretical Analysis of the Allocation of Family Control Rights Based on Guanxi in China Lingyan Gu School of Accounting, Zhejiang Gongshang University, Hangzhou, China Email: [email protected] Received 9 July 2014; revised 10 August 2014; accepted 2 September 2014 Copyright © 2014 by author and Scientific Research Publishing Inc. This work is licensed under the Creative Commons Attribution International License (CC BY). http://creativecommons.org/licenses/by/4.0/ Abstract With the development of the family businesses, family members are coming from diversified source. Under this circumstance, guanxi and potential conflicts between family members are becoming complicated. The allocation of control rights among the family members plays an important role. This paper proposes the allocation concept of the family guanxi-oriented control rights for the first time. On the basis of the review of classical theories about the control rights allocation, it builds a theoretical analysis framework of family control rights allocation embedding guanxi. Keywords Family Members, Family Control Rights, Allocation, Guanxi, Theoretical Analysis 1. Introduction Family firms typically depict a complex, long-standing stakeholder structure that involves family members, top management, and a board of directors [1]. Traditionally, researchers have assumed that owner-managed firms will have either zero or insignificant agency cost [2]-[4]. The reason is that family members are expected to be altruistic toward each other as a result of kinship obligations. However, family firms are often plagued by conflict. Relationship conflict, an interpersonal conflict that is laden with negative emotions like resentment and animosity, harms the performance of family firm [5]. In recent years, the events about the scramble for control rights between family members happen occasionally. For instance, the infighting of Zhen Kung fu which is the magnate of the global Chinese fast food chains draws heat to discussion. The issue results from the divorce of the couple who are the founders of Zhen Kung fu. It leads to the break-up of kinship which sustains the family enterprise. Like a lot of family firms, Zhen Kung fu is established by the support of kinsfolk, but suffering the fight for the internal control rights between the family How to cite this paper: Gu, L.Y. (2014) The Theoretical Analysis of the Allocation of Family Control Rights Based on Guanxi in China. Open Journal of Business and Management, 2, 314-320. http://dx.doi.org/10.4236/ojbm.2014.24037