Family involvement, internal control and agency costs – Evidences from China's listed family firms

SummaryThis study examines the agency costs of 314 family firms listed on Shanghai and Shenzhen Stock Exchange in China. The results show that agency costs of family firms increase significantly with the enhancement of family's ownership and the separation of ownership and control, while family involvement in management can reduce the agency costs. By including the variable proxying internal control and the interaction term between internal control and family involvement in the empirical model, we still find that the effects of family involvement on agency costs are contingent on the quality of internal control.