Family vs. Non-Family Firms: Linking Future Environmental Expenditures to Firm Value
-
Luu Thu Quang
Abstract
This study investigates the relationship between future environmental protection investments and corporate value in family firms during the 2015–2020 period. Family firms play a vital role in the economy, but their governance structures and succession dynamics create unique challenges for balancing sustainability with profitability. Using data from firm annual reports, this research compares environmental expenditures between family and non-family firms and examines their impact on corporate value. The results indicate that family firms invest more in future environmental protection than non-family firms, reflecting their emphasis on long-term value creation. Furthermore, the leadership structure influences these investments, with firms led by successor chairmen allocating more resources to environmental protection than those led by founder or outsider chairmen. Employing a two-stage least squares (2SLS) approach to address endogeneity, the findings reveal that higher environmental investments are positively associated with firm value, particularly in successor-led family firms. These results highlight the importance of environmental initiatives in mitigating agency problems and enhancing reputation, offering practical implications for policymakers and family firm leaders. This research contributes to the literature on family firm sustainability, demonstrating the role of governance and environmental responsibility in driving long-term corporate value.
1 Introduction
In recent years, many professional investment organizations and government regulatory agencies have actively encouraged companies to strengthen their commitments to environmental, social, and governance (ESG) issues. Some companies listed in international indices have disclosed their ESG scores, such as those in the Dow Jones, FTSE, UK100 and DAX indices. As ESG concepts have become increasingly popular and gained widespread attention, “environmental protection” has become an important issue that companies focus on. For example, in mainland China, the 30 largest companies by market capitalization disclosed in their 2022 annual reports that they collectively spent a total of 7.8 billion USD on environmental protection activities at their factories, including energy-saving costs. The China Securities Regulatory Commission also mandates that listed companies disclose information about their environmental protection expenses in their annual reports. Family firms are a common feature of Chinese enterprises. According to a report by the China Financial Institute in 2019, although they are not the largest companies, family-owned listed companies account for 76 % of all listed companies in China. Over time, the founding generation of family firms in China has gradually stepped back from leadership roles. The first generation of entrepreneurs, who contributed to China’s economic development, has also passed away in recent years, marking an important transitional phase in the development of Chinese family firm.
“Environmental protection” has become an increasingly important topic in recent years as global temperatures rise, and consumers are willing to pay more for products from companies that demonstrate environmental responsibility. In the process of creating value, firms need to ensure that they do not harm the environment and protect the planet to ensure long-term sustainable development. Environmental protection efforts are receiving growing attention from society and government regulatory agencies. One of the issues to be explored is whether family-owned firms place more emphasis on environmental protection than non-family firms. Is there any difference? Additionally, this study also examines whether investors place higher value on family-owned firms, which are expected to invest more in environmental protection in the future.
Previous studies have indicated that family firms are generally more willing to invest in corporate social responsibility (Cruz et al. 2014). Their research argues that, given the global emphasis on environmental protection, focusing on sustainability efforts and investing in related initiatives can significantly enhance a firm’s reputation. Compared to non-family firms, family-owned firms tend to prioritize the preservation of cultural values and the growth of financial assets (Al Rawaf and Alfalih 2023). As a result, it is anticipated that family firms will allocate more resources to environmental protection in the future than the non-family firms. For family-owned firms, increasing corporate value is a key goal. Our study will investigate whether investing more in environmental protection can lead to an increase in the firm value of family firms. This paper proposes that family firms can boost their value by increasing their investments in environmental sustainability, protecting their investments, improving corporate social responsibility efforts, and minimizing any potential harm to the interests of external shareholders. The combination of ownership and management rights in family firms allows them to effectively communicate their commitment to environmental protection, improve their public image, and reduce negative market perceptions related to agency costs, ultimately enhancing their overall firm value.
In Chinese family firms, founders often aim to pass the company to the next generation, commonly through father-to-son succession. For successors, ensuring the sustainable growth of the firm is a top priority. Research shows that family firms tend to adopt management strategies distinct from non-family firms (Smith 2007; Binacci et al. 2016; Chi et al. 2019). While intangible assets are challenging to fully transfer, they significantly influence the firm value (Bennedsen et al. 2022). This paper argues that first-generation business models are rarely fully replicable by successors, who must develop new strategies, including investments in environmental and social responsibility. This paper investigates whether family firms led by successors are more inclined to invest in environmental protection than other family firms. Prior studies indicate that successors often introduce innovative strategies to sustain growth (Stanonik 2024). This paper proposes that family firms with successors as chairpersons place greater emphasis on environmental responsibility, enhancing firm value and reducing agency costs through environmental investments.
The research data in this paper is drawn from family firms in China (People’s Republic of China) during the period 2015 to 2020. The empirical results show that family firms invest more in anticipated future environmental protection costs compared to non-family firms. Moreover, higher anticipated investments in environmental protection are associated with greater value for family firms. This indicates that family firms prioritize environmental protection more than non-family firms. Additionally, I found that family firms with a successor as the chairman invest more in future environmental protection costs compared to other family firms. Specifically, the greater the environmental protection investment by these firms, the higher their company value. These findings suggest that, in the context of increasing emphasis on environmental protection, successor leaders of family firms dedicate more attention to environmental protection initiatives.
This article makes several significant contributions:(i) this paper focuses on family firms in China, where the topics of succession and inheritance are gaining increasing attention. Previous studies have examined the impact of family succession on firm performance (Baek and Cho 2017; Yoo et al. 2014) or investments in pollution prevention strategies (Dou et al. 2019). However, this research is among the first to analyze the relationship between the environmental protection expenditures of Chinese family firms and their impact on firm value and market assessments. The findings address gaps in prior studies and highlight the role of family firms in the context of modern governance. (ii) Unique and comprehensive research data: Unlike prior studies, which were often confined to specific industries (Agostino and Ruberto 2021; Huang and Chen 2024; Du and Cao 2023), this paper analyzes data from the annual reports of publicly listed Chinese family firms from 2015 to 2020. The detailed examination of shareholder reports enables the precise identification of environmental protection expenditures, providing a more comprehensive understanding of family firms’ commitment to social and environmental responsibility. (iii) Illuminating the role of successor leadership: The study highlights how successor leaders in family firms play a pivotal role in advancing investments in environmental protection. Through long-term manual data collection, the research not only identifies the significance of successors but also examines the impact of succession on sustainable business strategies. Succession is shown to entail more than the transfer of assets or managerial authority; it also involves the transmission of core firm values across generations.
In the context of the China Financial Regulatory Commission’s push for Corporate Governance, this article underscores the importance of family firms increasing investments in environmental protection, fulfilling social responsibilities, and developing business philosophies aligned with environmental sustainability. These firms not only meet investor expectations but also strengthen their competitive advantages. The research further emphasizes that disclosing ESG (Environmental, Social, and Governance) information is becoming increasingly critical for attracting investment and fostering sustainable corporate value. The findings provide essential reference points for family firms in formulating sustainable development strategies and for regulatory authorities in establishing policies that promote ESG-focused corporate governance. These insights offer valuable guidance for future generations of leaders in preserving and enhancing the long-term value of family firms.
This paper is structured into six sections: Section 1 introduces the research motivation, questions, and significance; Section 2 reviews the literature and develops hypotheses; Section 3 outlines the research methodology and sample selection; Section 4 analyzes empirical results; Section 5 provides robustness check; and Section 6 concludes with recommendations.
2 Literature and Hypotheses
2.1 Previous Research on Environmental Expenditure Disclosure
In recent years, increasing environmental awareness has driven companies to allocate more resources toward environmental protection, showcasing their dedication to sustainability. Based on the classification framework presented in the Environmental Protection Administration’s China Industrial Environmental Accounting Guidelines, environmental protection expenditures, a key part of corporate operating costs, are divided into three categories: pollution prevention, global environmental protection, and sustainable resource utilization. These expenditures are intended to enhance environmental quality and support eco-friendly goals. To provide stakeholders with insights into their environmental initiatives and accomplishments, companies frequently include forecasts of major future environmental capital investments in their annual shareholder reports. While much of the existing research has examined the role of environmental accounting information disclosure, less attention has been given to the significance of projected environmental expenditures. This study seeks to fill that gap by evaluating the influence of such investments, arguing that they serve as indicators of a company’s commitment to environmental policies.
Previous studies have extensively examined how environmental performance and accounting disclosures influence firm value, cost of capital, and overall economic efficiency. Liu et al. (2021) analyzed listed firms exposed to environmental risks and found that investors tend to undervalue companies involved in pollution or environmental violations, suggesting a link between environmental expenditure disclosure and firm valuation. Similarly, Kaur (2021) showed that proactive environmental management – through actions such as reducing fines and mitigating environmental incidents – can enhance firm value. In a study of five major U.S. industries between 2000 and 2005, Plumlee et al. (2015) reported that high-quality voluntary environmental disclosures positively affect firm value. Eng et al. (2022) further demonstrated that greater transparency in environmental information can reduce information asymmetry and, consequently, the cost of capital, even though it may show a negative direct correlation with firm value. Consistent with these findings, Al-Tuwaijri et al. (2004) observed a positive relationship among environmental performance, disclosure, and economic outcomes in U.S. firms, noting that companies with superior environmental performance are more inclined to disclose pollution-related information. Recent studies have deepened understanding of corporate social responsibility (CSR) in China, linking it to environmental actions, systemic risk, and future environmental spending. Cao et al. (2025) show that CSR lowers systemic risk via better financial performance and stronger external supervision, especially during high policy uncertainty, fierce competition, and in non-state-owned firms. Tang and Yang (2024) emphasize social trust as a key informal factor enhancing ESG performance. Likewise, Dai and Jiang (2025) find that higher corporate policy uncertainty motivates firms, particularly those with higher risk, non-state ownership, and heavy pollution, to strengthen ESG practices as a risk mitigation strategy, thereby enhancing both risk resilience and total factor productivity.
Extending prior research, this study focuses on the unique context of family firms in China, which represent a significant proportion of listed companies and exhibit distinct characteristics compared to non-family firms. It explores whether family firms, particularly those led by a successor chairman, are more likely to allocate higher spending on environmental protection. Additionally, the study investigates the relationship between environmental protection expenditures and corporate value, aiming to determine whether such investments contribute to long-term value creation for these companies.
2.2 Family Firms and Future Environmental Expenditure
Previous studies have highlighted differences in how family and non-family firms perform in implementing corporate social responsibility (CSR). Since CSR encompasses various aspects, family firms may excel in some areas while underperforming in others. For instance, Block and Wagner (2014) examined US companies and found that family firms performed worse in community-related CSR but achieved higher performance in areas such as human resources, environmental initiatives, and product quality. The study attributed this to family firms’ focus on building emotional social assets and maintaining their reputation, motivating them to invest in CSR selectively. Similarly, Ang et al. (2022) analyzed listed companies in China and discovered a strong but negative relationship between family ownership and CSR performance. This indicates that family firms often prioritize family wealth and interests, which may limit their overall CSR engagement. Liu et al. (2024) also examined Chinese listed companies and found that family firms tend to specialize in CSR, focusing their resources on specific areas rather than addressing all aspects comprehensively. However, the study did not identify which aspects are prioritized.
Environmental protection is a crucial component of corporate social responsibility (CSR). While previous studies have investigated the extent to which family firms invest in environmental protection, their findings remain inconsistent (Abeysekera and Fernando 2020; Fan et al. 2021; Bendell 2022; Hosain 2025). Abeysekera and Fernando (2020) examined differences in CSR policies between family and non-family firms in the United States, using “environmental advantage” as an evaluation metric. Their findings revealed that family firms engage less in environmental protection activities. The study attributed this to family firms experiencing fewer agency problems but also facing lower levels of oversight and transparency, which limits their willingness to invest in environmental CSR due to financial concerns. Fan et al. (2021) analyzed companies in China and found that family firms invested less in pollution prevention compared to non-family firms. The study also noted that investment in pollution prevention was even lower in family firms where the founder also served as the general manager. In contrast, Bendell (2022) studied the dry cleaning industry in the United States and found that family firms were more likely to invest in environmental innovation technologies than non-family firms. These findings suggest that family firms’ investment in environmental CSR varies significantly across industries and countries. Unlike prior research, this paper not only provides the first comprehensive analysis of environmental CSR investments by listed family firms but also examines the role of family succession in these investments. Specifically, it investigates the influence of having a successor as the chairman of a family firm, extending the analysis beyond a single industry. Moreover, rather than relying on environmental investment indicators as used in previous studies, this paper introduces the disclosure of planned future environmental expenditures as a measure of a firm’s financial commitment to environmental CSR. This paper also will concentrate on the environmental dimension of CSR to explore the role of family firms in fulfilling their environmental responsibilities and contributing to sustainability initiatives.
The socioemotional wealth theory suggests that family firms prioritize the preservation of non-financial values, such as family ties and reputation, more than non-family firms (Dewangan et al. 2024; Ng et al. 2022; Berrone et al. 2012). Based on the socioemotional wealth theory, studies also suggest that family firms invest more in environmental protection than non-family firms. Specifically, family firms place a high value on enhancing non-financial values, and investing in pollution prevention technology improves their corporate image in an increasingly environmentally conscious context (Block and Wagner 2014). In addition, companies with a history of environmental violations are often undervalued by investors (Cai and He 2014). Investing in environmental protection reduces the risk of being sanctioned and increases corporate value. The disclosure of high environmental expenditures signals the company’s commitment to CSR, which helps reduce concerns about agency costs. Therefore, I argue that family firms, by focusing on SEW, have greater incentives to invest in environmental technologies, reduce pollution, improve their image, and move toward sustainable development. The research hypothesis H1 is proposed as follows: Family firms disclose larger future environmental expenditures than non-family firms.
Family firms are very common in China, and the issue of firm succession is the biggest challenge they face. Successors can be family members or non-family managers (Neffe et al. 2020). In Chinese culture, the value of passing on family heirlooms – that is, passing them on to the next generation with blood relations – is highly regarded (Alberts 2018). Research on family firms, especially succession, often applies social network theory, in which family founders and successors are key actors. Family succession is seen as a process of power transfer within the network, affecting the power structure and decision-making of successors (Muskat and Zehrer 2017; Leiß and Zehrer 2018). Therefore, whether the successor is a family member or not has a significant impact on the development of internal and external network relationships.
For family-owned enterprises, the main goal of the successor is to maintain the sustainability of the firm. However, due to changes in the times, it is difficult for them to completely replicate the founder’s model, and they need to develop new strategies. This study suggests that family firms with a chairman as the successor will invest more in environmental protection. First, they focus on family reputation and firm value, and environmental protection will help improve the firm image. Second, investment in environmental protection will reduce the risk of being fined and enhance firm value (Zhang et al. 2022). Finally, family firms with a chairman as the successor will have a greater incentive to reduce agency costs by publicizing environmental protection expenditures, thereby improving their image and commitment to social responsibility.
Therefore, this study proposes that family firms with a successor chairman will invest more in environmental protection than other family firms. Furthermore, the differences in environmental protection expenditures among family firms with different types of chairmanship will be examined. The proposed hypotheses are as follows: H2: In family firms, the future environmental costs of firms with a successor chairman will be higher than those of other family firms; H3: The future environmental costs will differ among family firms with a successor chairman, a founder chairman, and an outsider chairman.
2.3 The Value of Family Firms and their Future Environmental Expenditures
Previous research has shown that a firm’s market value is influenced by the severity of agency costs. According to agency theory, family firms – where family members often take on management roles – experience fewer conflicts of interest and less information asymmetry between managers and owners, thereby reducing type I agency problems. However, concentrated ownership structures, such as pyramids or cross-shareholdings, can intensify the separation between ownership and control, leading to more severe type II agency problems. This allows large shareholders to encroach on the interests of smaller shareholders, ultimately lowering the firm’s market value. Studies have indicated that family ownership often negatively impacts firm performance. For example, Bertrand et al. (2008) found that in Thailand, after a founder’s death, the active involvement of the founder’s son in management frequently led to reduced firm performance. Similarly, Basco (2013) observed that family member participation in management negatively affects economic performance. In China, where most family firms are managed by family members with minimal outside employees, performance is often poorer. Xu et al. (2015) found that family-owned firms listed in China generally perform worse than non-family firms.
As corporate social responsibility (CSR) gains increasing attention, numerous studies have investigated its impact on firm value. Hassel et al. (2005) found that higher environmental performance scores are associated with greater shareholder value, indicating that investments in environmental protection can enhance firm value. Similarly, Noor et al. (2020) examined the sustainability of CSR in companies across Brazil, Russia, India, and China, finding that sustainable CSR practices significantly improve firm value in family firms. They also highlighted that both the social and environmental dimensions of CSR contribute to this positive effect. In recent years, environmental concerns have gained heightened attention. Companies are now expected not only to create value but also to protect the environment to maximize long-term performance. This study posits that family firms investing in environmental protection are likely to achieve higher firm value. However, family firms often encounter the Type II agency problem, where controlling shareholders simultaneously hold management roles, prioritize family members in key positions, and limit external talent acquisition. This governance structure can negatively impact performance (Ehikioya 2009; Firth et al. 2006). To counter these challenges, investing in environmental CSR can send a positive signal to the market, enhance corporate reputation, and improve firm value (Xu et al. 2018; Noor et al. 2020). Additionally, environmental investments help family firms avoid legal risks related to pollution, showcase a commitment to sustainability, and promote good governance practices. These efforts can reduce information asymmetry, lower agency costs, and further increase firm value. Environmental CSR also drives green innovation (Khurshid et al. 2025; Shahzad et al. 2020), as significant investments in environmental protection encourage creativity, improve operational efficiency, and boost firm value. Based on these arguments, our study proposes the following hypothesis: H4: Under the same conditions, family firms that disclose higher future environmental protection costs will have greater firm value than other firms.
In Chinese family firms, founders often aspire to pass their enterprises to their descendants, typically following a father-to-son succession model. However, ensuring sustainable development after the transition poses significant challenges for the next generation (Xu et al. 2015; Weng and Chi 2019). Bennedsen et al. (2015) introduced the “transfer cost hypothesis,” which suggests that founders’ intangible assets – such as reputation and relationships – are challenging to fully transfer to successors, despite their critical role in influencing firm value. Weng and Chi (2019) analyzed Chinese family firms from 2003 to 2015 and discovered that second-generation successors often pursue business diversification after taking over, leading to improved performance. This indicates that the business strategies of founders and their successors frequently differ. By developing unique strategies and enhancing their competitiveness, successors have the potential to generate greater value for the firm in fast-changing environment.
Family firms with a successor as chairperson often follow an internal succession model. For these firms, a higher anticipated investment in environmental protection signals a strong commitment to environmental sustainability. Since the 1980s, successor-led family firms have demonstrated greater focus on environmental protection spending compared to other family firms. This approach sends a positive message to the market, emphasizing their dedication to social responsibility and its integration into long-term financial planning. Investing in environmental protection reduces information asymmetry between the firm and the market while addressing concerns about the high overlap of ownership and management in family firms. Such investments also enhance market confidence and firm value (Ye and Yuan 2008; Zhou et al. 2020). Based on these arguments, this study proposes the following hypothesis: H5: Other factors being equal, family firms with a successor chairperson and higher disclosed future environmental protection costs will have greater firm value than other family firms.
This paper categorizes family firms into three types based on leadership: those with successor chairpersons, founder chairpersons, and expert chairpersons. It examines how the disclosure of future environmental protection costs affects firm value across these groups. For family firms led by successor chairpersons, higher disclosed environmental protection costs can help mitigate the market’s negative perception of elevated Type II agency costs. In contrast, firms with expert chairpersons can enhance firm value by balancing the costs and benefits of environmental spending and performance reporting. The study explores these differences and proposes the following hypothesis: H6: All else being equal, the impact of future environmental protection cost disclosure on firm value will vary among family firms led by successor, outsider, and founder chairpersons.
3 Data and Methodology
This study is grounded in two key theoretical frameworks: socioemotional wealth (SEW) theory and agency theory, which inform both the research design and the empirical methodology. SEW theory suggests that family firms prioritize non-financial goals such as reputation and legacy, leading them to invest more in long-term initiatives like environmental protection. Agency theory, meanwhile, helps explain variations in firm value based on differences in governance structures and ownership concentration – particularly relevant when comparing family and non-family firms or examining internal succession dynamics.
Guided by these theories, the empirical approach seeks to test whether family firms (particularly those led by successors) disclose higher future environmental protection expenditures, and whether such expenditures are positively associated with firm value. The data was collected from various sources between 2015 and 2020. Specifically, future environmental protection expenditures of firms were taken from annual reports (companies often provide future environmental protection costs for the next 3 years). In this study, we believe that the environmental protection expenditure for the next three years more accurately reflects the company’s long-term commitment to environmental protection investment, which has been used as a policy indicator in previous research. Our research sample includes both family and non-family firms. Family firms are defined as those meeting the following three criteria: (1) at least one family member is a shareholder; (2) two or more family members are directors or managers; (3) the family holds more than 20 % of the voting rights (Li and Chen 2024; Anderson and Reeb 2003; Srinidhi et al. 2014). After identifying family firms, the study classifies them based on ownership and management rights, which are determined by the role of the board chairman (Jiang et al. 2020). Specifically, family firms are categorized into three groups: family firms with successors (second or third generation), family firms with founders, and family firms with a non-family professional as chairman. Other financial and corporate governance variables used in the model are obtained from the CSMAR database, a widely recognized and reputable dataset commonly used in studies of listed companies on the Chinese stock market. The dataset excludes insurance, banking, and financial companies. The initial sample consists of 8,248 companies. After removing cases with missing data on environmental protection costs and other financial control variables, the final sample includes 7,216 companies. Of these, 4,184 are family firms and 3,020 are non-family firms. For detailed information regarding the industry characteristics of the companies, refer to Appendix A. Table 1 below provides detailed descriptions of the variables and their measurement methods.
Variables.
| Abbreviations | Description | Source |
|---|---|---|
| FEPE | FEPE represents the future environmental protection expenditure for the next three years divided by the number of shares outstanding | Annual report |
| FAM | FAM represents family firms, taking the value of 1 if the firm is a family firm and 0 if it is non-family firm | Data is filtered by the author |
| PIND | PIND represents highly polluting industries. If the firm belongs to the cement, chemical, paper, steel, electronics, oil, electricity, or gas industries, PIND is assigned a value of 1; otherwise, it is 0. | Data is filtered by the author |
| LOSS | LOSS represents losses and penalties due to pollution, calculated as the value disclosed in the annual report divided by the number of shares outstanding. | Annual report |
| LEV | LEV is the debt ratio (total liabilities divided by total assets) | CSMAR |
| SIZE | SIZE represents the size of a company, measured as the natural logarithm of its total market value. | CSMAR |
| ROA | ROA (return on assets) is measured by net income divided by total assets | CSMAR |
| GROWTH | GROWTH represents the revenue growth rate, calculated as the difference in operating income between two periods divided by the operating income of the previous period | CSMAR |
| AGE | AGE is the number of years the company has been in operation, measured by the natural logarithm of the year it was founded. | CSMAR |
| BOARD | BOARD represents the size of the board of directors, measured as the natural logarithm of the number of board members | CSMAR |
| IND | IND is the independent director ratio, calculated by dividing the number of independent directors by the total number of board members. | Annual report |
| BIGS | BIGS represents the proportion of shares held by shareholders owning more than 10 % of the shares (excluding directors and supervisors), calculated as their shareholding divided by the total number of shares outstanding. | Data is calculated by the author |
| MO | MO represents the managerial ownership ratio, calculated as the number of shares held by managers divided by the total number of shares outstanding | CSMAR |
| VOTE | VOTE represents the voting rights, calculated as the total direct and indirect shareholding ratio of the ultimate controller. | CSMAR |
| SSDA | SSDA represents the stock earning deviation, defined as the difference between voting rights and income distribution rights. | Data is calculated by the author |
| CROSS | CROSS represents the cross-ownership structure, taking the value of 1 if the company has a cross-ownership structure and 0 otherwise. | Data is filtered by the author |
| SUC | SUC is a dummy variable that takes the value of 1 if the company chairman is a descendant of the family founder (from the second or third generation), and 0 otherwise | Data is filtered by the author |
| OUT | OUT is assigned a value of 1 if the firm is a family firms and the chairman of the board is hired from outside, and 0 otherwise | Data is filtered by the author |
| FOUNDER | FOUNDER is assigned a value of 1 if the firm is a family firms and the chairman of the board is the founder, and 0 otherwise | Data is filtered by the author |
| PPE | PPE stands for Property, Plant, and Equipment, which refers to tangible fixed assets | CSMAR |
| CUR | CUR represents the company’s short-term solvency, calculated as the ratio of current assets to current liabilities | CSMAR |
| HHI | HHI stands for the Herfindahl-Hirschman Index, a widely used measure of market concentration within an industry | Data is calculated by the author |
| TOBINQ | TOBINQ represents enterprise value, calculated using the formula: (market value of common stock + book value of preferred stock + book value of debt) ÷ book value of total assets | CSMAR |
Table 2 presents the descriptive statistics of the variables in the empirical model. The average value of FEPE in the sample is relatively small (mean = 0.0594, see Table 2). Nevertheless, this is not unusual and does not invalidate the use of a linear model such as OLS or 2SLS. This is because FEPE represents an absolute percentage calculated by dividing future environmental spending by the number of outstanding shares. Moreover, since FEPE serves as the dependent variable in the linear model, therefore, its scale does not affect the estimation results. Second, the linear model is appropriate for estimating average effects across firms and remains valid even when the dependent variable is skewed toward lower values, as long as standard assumptions (e.g. homoscedasticity, linearity, and error independence) are not violated. Third, we conducted robustness checks including Heckman’s two-stage correction and subsample analyses (Section 5), which yield consistent results, further supporting the suitability of the linear model. Therefore, the small magnitude of FEPE does not bias our estimation or invalidate the modeling approach used. It is important to note that the variable FEPE is calculated as future environmental protection expenditure divided by the number of shares outstanding. As such, differences in FEPE between family and non-family firms can stem from variation in either the total investment amount (the numerator) or the firm size and ownership structure (the denominator). Family firms, which typically have more concentrated ownership and fewer outstanding shares, may show higher FEPE values due to a smaller denominator, even if their total expenditure is comparable. However, this study finds that the total expenditure reported by family firms is also significantly higher on average (see Table 3), reinforcing the interpretation that family firms are genuinely more committed to environmental investment, not just benefiting from a structural difference in share base. Family firms make up 57.9 % of the sample (average FAM = 0.5798), with 13.05 % having a successor chairman (SUC = 0.1305), 16.9 % having an externally hired chairman (OUT = 0.1699), and 27.9 % having a founder chairman (FOUNDER = 0.2794). The average firm value (TOBINQ) is 1.3389.
Descriptive statistics.
| Variable | Number of observation | Mean | Standard deviation | Min | Max |
|---|---|---|---|---|---|
| FEPE | 7,216 | 0.0594 | 0.0824 | 0.0000 | 0.5477 |
| FAM | 7,216 | 0.5798 | 0.3142 | 0.0000 | 1.0000 |
| PIND | 7,216 | 0.3924 | 0.4703 | 0.0000 | 1.0000 |
| LOSS | 7,216 | 0.0011 | 0.0001 | 0.0000 | 0.0090 |
| LEV | 7,216 | 0.3501 | 0.1763 | 0.0354 | 0.9810 |
| SIZE | 7,216 | 19.1294 | 1.7844 | 11.3746 | 25.8648 |
| ROA | 7,216 | 0.0094 | 0.0126 | −0.0226 | 0.0495 |
| GROWTH | 7,216 | 0.0548 | 0.4749 | −0.8940 | 3.6420 |
| AGE | 7,216 | 3.2091 | 0.4468 | 0.5911 | 5.3796 |
| BOARD | 7,216 | 1.8653 | 0.2104 | 1.6185 | 2.8021 |
| IND | 7,216 | 0.3113 | 0.0703 | 0.0000 | 0.6791 |
| BIGS | 7,216 | 0.2368 | 0.1283 | 0.0592 | 0.8366 |
| MO | 7,216 | 0.0274 | 0.0103 | 0.0000 | 0.2091 |
| VOTE | 7,216 | 0.2730 | 0.1622 | 0.0165 | 0.8333 |
| SSDA | 7,216 | 0.0630 | 0.1177 | 0.0000 | 0.7903 |
| CROSS | 7,216 | 0.2444 | 0.4085 | 0.0000 | 1.0000 |
| SUC | 7,216 | 0.1305 | 0.3475 | 0.0000 | 1.0000 |
| OUT | 7,216 | 0.1699 | 0.3457 | 0.0000 | 1.0000 |
| FOUNDER | 7,216 | 0.2794 | 0.4306 | 0.0000 | 1.0000 |
| PPE | 7,216 | 0.1743 | 0.1789 | 0.0041 | 0.6044 |
| CUR | 7,216 | 2.6437 | 3.5354 | 0.1780 | 29.1153 |
| HHI | 7,216 | 0.0024 | 0.0128 | 0.0000 | 0.1057 |
| TOBINQ | 7,216 | 1.3389 | 0.8134 | 0.4164 | 5.3356 |
-
Detailed explanations of the variables are provided in Table 1.
Family firms vs. non-family firms.
| Variable | Family firms | Non-family firms | Difference |
|---|---|---|---|
| FEPE | 0.0613 | 0.0575 | 0.0038** |
| PIND | 0.3499 | 0.4349 | −0.0850 |
| LOSS | 0.0018 | 0.0004 | 0.0014 |
| LEV | 0.3790 | 0.3212 | 0.0578 |
| SIZE | 12.0041 | 26.2547 | −14.2506*** |
| ROA | 0.0103 | 0.0085 | 0.0018** |
| GROWTH | 0.0588 | 0.0508 | 0.0080* |
| AGE | 3.3790 | 3.0392 | 0.3398 |
| BOARD | 1.8453 | 1.8853 | −0.0400 |
| IND | 0.3097 | 0.3129 | −0.0032 |
| BIGS | 0.2410 | 0.2326 | 0.0084** |
| MO | 0.0083 | 0.0465 | −0.0382* |
| VOTE | 0.3101 | 0.2359 | 0.0742** |
| SSDA | 0.0520 | 0.0740 | −0.0220 |
| CROSS | 0.2379 | 0.2509 | −0.0130* |
| PPE | 0.1617 | 0.1869 | −0.0252** |
| CUR | 2.5871 | 2.7003 | −0.1132 |
| HHI | 0.0033 | 0.0015 | 0.0018 |
| TOBINQ | 1.2718 | 1.4060 | −0.1342** |
-
Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
Table 3 compares family firms (4,184 observations) and non-family firms (3,020 observations). Family firms have a higher FEPE of 0.0613 compared to non-family firms, with a difference of 0.0038 (significant at the 5 % level), suggesting that family firms are associated with higher future environmental expenditure. Additionally, family firms are smaller in size (SIZE) than non-family firms, with a difference coefficient of −14.2506 (significant at the 1 % level). Conversely, the average TOBINQ value of family firms (1.2718) is lower than that of non-family firms (1.4064).
To test hypothesis H1, I propose the following equation:
The dependent variable, FEPE, represents the future environmental protection expenditure. The variable FAM represents family firms, taking the value of 1 if the firm is a family firm and 0 if it is non-family firm. Based on previous studies (Baalouch et al. 2019; Lin et al. 2021; Li and Chen 2024), the model includes the following control variables: highly sensitive industries (PIND), environmental pollution losses and penalties (LOSS), debt ratio (LEV), firm size (SIZE), return on assets (ROA), sales growth rate (GROWTH), and years of establishment (AGE).
This paper also controls for the impact of corporate governance characteristics on environmental protection expenditures, including BOARD (board size), IND (independent director ratio), BIGS (major shareholder ownership ratio), MO (manager ownership ratio), VOTE (voting rights), SSDA (stock earning deviation), and CROSS (cross-ownership structure). Additionally, Industry Fixed Effect are used to account for the impact of industry characteristics of listed companies on the China Stock Exchange, while Year Fixed Effect control for the effect of years on future environmental protection expenditures. In Equation (1), i denotes individual firms, t denotes years, and j denotes industries. Detailed explanations of the variables are provided in Table 1.
To test hypothesis H2, I substitute the FAM variable in Equation (1) with the SUC variable (successor). SUC is a dummy variable that takes the value of 1 if the company chairman is a descendant of the family founder (from the second or third generation), and 0 otherwise. All other variables in the model remain unchanged.
To test hypothesis H3, firms are categorized into three groups: (i) Successor Chairman (SUC), (ii) Outside Chairman (OUT), and (iii) Founder (FOUNDER). The aim is to examine differences in environmental expenditure among these three types of family firms. Specifically, the variable OUT is assigned a value of 1 if the firm is a family firms and the chairman of the board is hired from outside, and 0 otherwise. Similarly, the variable FOUNDER is assigned a value of 1 if the firm is a family firms and the chairman of the board is the founder, and 0 otherwise.
Hypothesis H4 explores the relationship between environmental protection expenditure and firm value within family firms. It is hypothesized that family firms investing more in environmental protection may achieve higher firm value. However, an endogeneity issue could arise between environmental protection expenditure and future firm value. While environmental investment might enhance firm value, firms with higher value may also prioritize corporate image, leading to increased environmental spending. Given the growing emphasis on environmental protection, firms may invest in this area to gain favorable market evaluations (Tang et al. 2024). To address the endogeneity problem, this study employs the two-stage least squares (2SLS) method to estimate the regression results and mitigate potential biases. Two instrumental variables are employed: PIND, a dummy variable equal to 1 if the firm operates in a highly polluting industry (such as cement, chemical, paper, steel, electronics, oil, electricity, or gas); and LOSS, the amount of penalties or losses arising from environmental violations, scaled by the number of shares outstanding. In the first stage, Equation (2) is used to estimate the predicted value of future environmental protection expenditure. This predicted value is then included in Equation (3) and analyzed using the OLS method. The empirical Equation (2) and (3) are specified as follows:
In Equation (3), the dependent variable is firm value (TOBINQ), calculated using the formula: (market value of common stock + book value of preferred stock + book value of debt) ÷ book value of total assets. Consistent with previous research, TOBINQ is used as a proxy variable to measure firm value (Chung and Pruitt 1996). The ESFEPE variable represents the future environmental expenditure, which is estimated from the Equation (2). To analyze the marginal impact of family firms on firm value at different levels of environmental expenditure, this study hypothesizes (based on the expectation of H4) a positive relationship between FAM × ESFEPE and TOBINQ. In other words, family firms that allocate more resources to environmental protection expenditure are expected to achieve higher firm value. Detailed explanations of the variables are presented in Table 1.
This study predicts that, for family firms with a successor chairman, a greater investment in environmental protection expenditures will lead to a higher firm value. Consistent with hypothesis H4, the study employs the two-stage least squares (2SLS) method to estimate the regression results. In the first stage, Equation (2) is estimated. In the second stage, Equation (4) is presented as follows to test hypothesis H5:
In this paper, family firms are categorized into three groups: firms with successor chairpersons (SEC), outsourced chairpersons (OUT), and founder chairpersons (FOUNDER). The objective of the study is to assess the impact of environmental expenditure disclosure on firm value while examining potential differences among these three types of family firms. Similar to hypotheses H4 and H5, the study employs the two-stage least squares (2SLS) method to estimate the regression results. In the first stage, Equation (2) is estimated. In the second stage, Equation (5) is presented as follows to test hypothesis H6:
4 Empirical Results
In order to avoid multicollinearity during the analysis, I thoroughly examined the correlation coefficients between the independent variables, as detailed in Appendix B. The results indicate that the variables generally have relatively low correlation coefficients, with most values below the 0.5 threshold. This suggests that the correlations between the variables are insignificant, minimizing the possibility of multicollinearity in the regression analysis model.
Table 4 presents a regression analysis of future environmental protection expenditures (FEPE), revealing significant differences between family and non-family firms (H1). Family firms consistently allocate more resources to environmental expenditures, as shown by the positive and significant coefficients for the FAM variable in Model 1 (0.0125, t = 2.16). The coefficient of 0.0125 for the FAM variable in Table 4 (Model 1) suggests that, all else equal, being a family firm is associated with an increase of 0.0125 units in future environmental protection expenditure per share. Given that the mean value of FEPE is 0.0594 (Table 2), this represents approximately a 21 % increase (0.0125/0.0594), indicating a substantial economic effect. This supports the interpretation that family firms have a stronger long-term commitment to environmental investment than non-family firms. This result is similar to Model 2 (0.0162, t = 2.47), suggesting that family firms prioritize sustainability, possibly due to their long-term orientation and focus on socioemotional wealth. Firms in highly polluting industries (PIND) disclose significantly higher environmental expenditures, with coefficients of 0.0113 (t = 3.11) in Model 1 and 0.0223 (t = 3.37) in Model 4. Similarly, firms with pollution-related losses (LOSS) exhibit the largest impact, with coefficients such as 13.7873 (t = 4.57) in Model 1. Firm size (SIZE) and age (AGE) are also positively associated with FEPE, reflecting larger and older firms’ greater capacity and motivation to invest in sustainability.
Regression analysis of different types of family firms on future environmental protection expenditures.
| Variable | FEPE | |||
|---|---|---|---|---|
| All samples (model 1) | All samples (model 2) | Family firms (model 3) | All samples (model 4) | |
| FAM | 0.0125** (2.16) | 0.0162** (2.47) | ||
| PIND | 0.0113*** (3.11) | 0.0153*** (3.17) | 0.0127** (2.33) | 0.0223*** (3.37) |
| LOSS | 13.7873*** (4.57) | 12.1784*** (4.21) | 15.1485*** (4.65) | 13.1164*** (4.93) |
| LEV | −0.0102 (−0.53) | −0.0048 (−0.64) | −0.0132 (−0.77) | −0.0124 (−0.88) |
| SIZE | 0.0158*** (4.46) | 0.0177*** (3.78) | 0.0187*** (3.15) | 0.0152*** (4.50) |
| ROA | −0.0632 (−0.50) | 0.0120 (0.53) | −0.1105 (−0.67) | −0.0208 (−0.49) |
| GROWTH | −0.0146 (−1.19) | −0.0330 (−0.97) | −0.0207 (−0.58) | −0.0134 (−0.84) |
| AGE | 0.0195*** (4.59) | 0.0219*** (3.53) | 0.0357*** (3.64) | 0.0330*** (4.65) |
| BOARD | 0.0354*** (3.14) | 0.0415*** (3.42) | 0.0183*** (3.17) | |
| IND | −0.0311 (−1.46) | −0.0121 (−0.56) | −0.0256 (−1.55) | |
| BIGS | −0.0231* (−1.82) | −0.0268 (−1.25) | −0.0199 (−1.17) | |
| MO | 0.0417 (0.46) | −0.0350 (−0.44) | 0.0287 (0.63) | |
| VOTE | 0.0129 (0.96) | 0.0171 (0.67) | 0.0210 (1.37) | |
| SSDA | −0.0173 (−0.44) | 0.0214 (0.34) | −0.0320 (−1.26) | |
| CROSS | 0.0145 (0.57) | 0.0187 (0.39) | 0.0165 (0.88) | |
| SUC | 0.0271** (2.43) | 0.0367*** (3.55) | ||
| OUT | 0.0284** (2.77) | |||
| FOUNDER | 0.0045 (0.56) | |||
| Industry fixed effect | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes |
| Adjusted R2 | 15.21 % | 15.12 % | 16.15 % | 16.78 % |
-
The dependent variable is FEPE. Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
The leadership structure within family firms further influences environmental expenditures. Firms led by successors (SUC) allocate significantly more resources to environmental protection, with a coefficient of 0.0271 (t = 2.43) in Model 3. This indicates that, in family firms, the future environmental costs for those with a successor chairman are higher than those of other family firms (H2).
In mode 4, the coefficient of firm with successor chairman is highest (0.0367, t = 3.55). Firms with external chairpersons (OUT) also disclose higher FEPE (0.0284, t = 2.77), while founder-led firms (FOUNDER) show no significant statistic. These findings highlight that successors and external chairman may adopt more progressive strategies to enhance long-term sustainability. And the future environmental costs will differ among family firms with a successor chairman, a founder chairman, and an outsider chairman (H3). Corporate governance also impacts FEPE, particularly board size (BOARD), which shows positive and significant effects across models, such as 0.0354 (t = 3.14) in Model 2. However, other governance variables, like the proportion of independent directors (IND), show minimal influence.
In summary, family firms, especially those with successors or external leadership, exhibit stronger commitments to environmental protection. Industry pressures, firm characteristics, and governance structures significantly shape these expenditures, providing important implications for sustainability and governance practices.
To address the potential endogeneity between future environmental protection expenditure (FEPE) and firm value (TOBINQ), this study adopts a two-stage least squares (2SLS) approach. The instruments used in the first-stage regression are PIND (a dummy for highly polluting industries) and LOSS (penalties due to environmental violations). These variables are chosen because they influence a firm’s incentive to invest in environmental protection but are unlikely to directly affect firm value, satisfying both relevance and exogeneity conditions.
In the first-stage results (Model 1 in Table 5), PIND and LOSS are both significantly and positively associated with FEPE, confirming their relevance. Specifically, firms in polluting industries or with prior pollution-related losses are more likely to increase environmental spending to reduce future regulatory risks.
The relationship between different types of family firms, their future environmental protection expenditure, and firm value.
| All samples | Family firms | All samples | ||||
|---|---|---|---|---|---|---|
| Model 1 | Model 2 | Model 3 | Model 4 | Model 5 | Model 6 | |
| FEPE | TOBINQ | FEPE | TOBINQ | FEPE | TOBINQ | |
| PIND | 0.0629*** | 0.0265*** | 0.0629*** | |||
| LOSS | 14.6437*** | 16.1464*** | 14.6437*** | |||
| LEV | −0.0254** | −0.2215** | −0.0580 | −0.0478 | −0.0254** | −0.4659** |
| SIZE | 0.0170*** | 0.1357*** | 0.0327*** | 0.2565*** | 0.0170*** | 0.3263*** |
| ROA | 0.0123 | 20.1864*** | −0.0293 | 22.7644*** | 0.0123 | 24.1463** |
| GROWTH | 0.0044 | 0.2878*** | 0.0578 | 0.358** | 0.0044 | 0.1493*** |
| AGE | 0.0257*** | −0.3190** | 0.0944*** | −0.3229*** | 0.0257*** | −0.2468*** |
| BOARD | 0.0237*** | −0.1257 | 0.0590*** | −0.0238 | 0.0237*** | −0.1144 |
| IND | −0.0302** | −0.3289** | −0.0561 | −0.2458 | −0.0302** | −0.3499** |
| BIGS | −0.0264** | 0.7678*** | −0.1910* | 0.9802*** | −0.0264** | 0.5654*** |
| MO | 0.0418 | 1.1776 | −0.0407 | 4.2692** | 0.0418 | 1.2470 |
| VOTE | 0.0144 | −0.0565 | 0.0030 | 0.3507 | 0.0144 | −0.6570 |
| SSDA | −0.0219** | 0.2118 | −0.0222 | −0.3329 | −0.0219** | 0.5687 |
| CROSS | 0.0189** | −0.1453*** | 0.0048 | −0.1460*** | 0.0189** | −0.5545*** |
| PPE | 0.0406*** | 0.1552* | 0.0474** | 0.2341 | 0.0406*** | 0.4690* |
| CUR | 0.0072 | 0.0764*** | 0.0105 | 0.0327*** | 0.0072 | 0.0676** |
| HHI | 0.7238*** | −0.1490 | 1.1485** | −3.5405*** | 0.7238*** | −0.5873 |
| ESFEPE | −4.8573*** | −1.9943** | −4.6655*** | |||
| FAM | −0.0775 | |||||
| ESFEPE × FAM | 3.8110** | |||||
| SUC | −0.5664*** | −0.2464*** | ||||
| ESFEPE × SUC | 1.9036** | 6.1556*** | ||||
| OUT | 0.1356 | |||||
| ESFEPE × OUT | 2.6759 | |||||
| FOUNDER | −0.1359*** | |||||
| ESFEPE × FOUNDER | 1.7756 | |||||
| Industry fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| First-stage F statistic (PIND, LOSS) | 17.92*** | 15.33*** | 16.25*** | |||
| Adjusted R2 | 14.55 % | 37.15 % | 17.36 % | 38.68 % | 14.55 % | 39.99 % |
-
Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
Regarding exogeneity, we argue that PIND reflects sector characteristics that are relatively stable and do not directly drive changes in firm valuation. Similarly, LOSS captures past incidents that affect future environmental decisions but are unlikely to directly affect TOBINQ once FEPE is controlled for. To ensure the instruments are not weak, we report the joint first-stage F-statistic for PIND and LOSS, which is 17.92 – exceeding the critical threshold of 10 recommended by Staiger and Stock (1997).
In short, PIND and LOSS are valid and strong instruments. Their use in the 2SLS model helps address endogeneity concerns and supports the reliability of the estimated impact of FEPE on firm value.
Model 2 (Table 5) presents the results of Equation (3). ESFEPE represents the future environmental protection expenditure, as estimated from Equation (2). The regression coefficient is negative (−4.8573) and significant (p < 0.01), indicating that increased investment in environmental protection does not improve firm value. Similarly, Al-Tuwaijri et al. (2004) found that better environmental performance does not necessarily correlate with better economic performance. This study suggests that, while investment in environmental protection can enhance competitiveness and generate economic benefits, it also increases operating costs. When weighing both costs and benefits, the benefits may not outweigh the costs, resulting in a decrease in firm value. In particular, listed companies in China may find that investment in environmental protection reduces corporate value because the associated costs are relatively high, and the benefits are not immediately apparent. However, this analysis does not account for differences between types of companies. As environmental protection becomes increasingly emphasized, the economic impacts of such investments may vary across different types of firms. The regression coefficient of FAM does not reach the significance level. However, the coefficient of the interaction variable (ESFEPE × FAM) is 3.8110 and achieves significance at the 5 % level. After controlling for potential endogeneity problems, the results suggest that family firms are expected to invest more in environmental protection, leading to higher firm value. This finding supports Hypothesis H4 in this paper.
Next, Table 5 (Models 3 and 4) presents the regression results testing Hypothesis H5, which examines the impact of family firms with a successor chairman, expected to invest more in future environmental protection expenditures, on firm value, using the two-stage least squares (2SLS) method. The second-stage results (Equation (4)) show that the regression coefficient for the SUC variable is negative and statistically significant (−0.5664), indicating that family firms with a successor chairman have lower firm value than other family firms. This result is consistent with previous studies (Anderson and Reeb 2003; Bertrand et al. 2008), which found that the performance of family firms led by successors is often worse than that of those led by founders. However, the coefficient of the interaction variable, ESFEPE × SUC, which represents future environmental protection expenditures in family firms with a successor chairman, is positive and statistically significant (1.9036). The joint test of SUC and ESFEPE × SUC shows an F value of 6.24 (p = 0.032), indicating that investment in environmental protection can improve firm value in family firms with a successor chairman. In summary, the empirical results support Hypothesis H5, which asserts that family firms led by successors, if they invest more in future environmental protection expenditures, will have higher firm value.
To test Hypothesis H6 on the impact of different types of family firms on firm value, the sample is divided into three groups: (1) successor chairman (SUC), (2) outsider chairman (OUT), and (3) founder chairman (FOUNDER). The regression results from Models 5 and 6 in Table 5 test this hypothesis. Model 5 presents the first-stage results, while Model 6 shows the second-stage results, where the interaction variables ESFEPE × SUC, ESFEPE × OUT, and ESFEPE × FOUNDER examine the relationship between family firm type and future environmental protection expenditures. The results reveal that the coefficient for ESFEPE × SUC is positive (6.1556) and statistically significant at the 1 % level, confirming that family firms with a successor chairman can improve firm value by increasing environmental protection expenditures, supporting Hypothesis H6. In contrast, the coefficients for ESFEPE × OUT and ESFEPE × FOUNDER are positive but not statistically significant, suggesting no evidence that environmental protection spending affects the firm value of firms led by a outsider chairman or founder. Additionally, Model 6 shows that the coefficients for SUC and FOUNDER are negative and statistically significant, while the OUT coefficient is positive but not significant. This indicates that family firms with an outsider chairman are less affected by agency costs. The statistical significance of the difference between ESFEPE × OUT and ESFEPE × FOUNDER further confirms that the impact of environmental protection costs on firm value varies by family firm type. These findings support Hypothesis H6, suggesting that the effect of environmental protection expenditures on firm value differs depending on the type of family firm.
Table 5 shows that the control variables – firm size (SIZE), return on assets (ROA), growth (GROWTH), and current ratio (CUR) – are all positively and significantly correlated with firm value. This indicates that larger firms with higher profitability, greater growth opportunities, and better liquidity tend to have higher values, consistent with previous studies (Luu and Dang 2023). For corporate governance variables, the regression coefficient for large shareholder ownership ratio (BIGS) is positive and significant, suggesting that firms with higher ownership concentration by large shareholders tend to have greater firm value. Conversely, CROSS (cross ownership) is significantly negatively correlated with firm value, indicating that firms with cross ownership structures are associated with lower values.
5 Robustness Check
5.1 Alternative Sample
During the study, I found that four industries – electronic distribution, information services, agricultural technology, and e-commerce – did not disclose their estimated future environmental protection costs. This is likely because these industries are less polluting and therefore do not incur such costs. To minimize their impact on the empirical results, this study removes these industries from sample before reanalyzing the hypotheses.
Table 6 presents the re-analysis of Hypotheses H1, H2, and H3 after excluding the industries that did not disclose their estimated environmental protection expenditures. The regression coefficient of FAM is positive and significant at the 1 % level (0.0263, t = 3.15; 0.0162, t = 3.81), indicating that family firms are more likely to invest in future environmental protection costs than non-family firms, supporting Hypothesis H1. For Hypothesis H2, the model 3 shows the regression results for family firms only. The coefficient of SUC is positive and significant at the 5 % level (0.0360, t = 2.63), suggesting that family firms with successor chairmen are more likely to invest in future environmental protection costs than others, supporting H2. The model 4 continues categorizing the family firms into three types: the successor chairman (SUC), an outsider chairman (OUT), and a founder chairman (FOUNDER). The regression results for the entire sample (model 4) show that the coefficient for SUC is positive and significant at the 1 % level (0.0373, t = 3.42), and the coefficient for OUT is positive and significant at the 5 % level (0.0237, t = 2.53). These findings support H3, confirming significant differences in environmental protection expenditures across family firms led by successors, outsiders, and founders. The results align with the primary regression analysis.
Regression analysis of different types of family firms on future environmental protection expenditures (the sample excludes industries that did not disclose their future environmental protection expenditures).
| Variable | FEPE | |||
|---|---|---|---|---|
| All samples (model 1) | All samples (model 2) | Family firms (model 3) | All samples (model 4) | |
| FAM | 0.0263*** (3.15) | 0.0162*** (3.81) | ||
| PIND | 0.0210** (2.16) | 0.0433*** (4.55) | 0.0409** (2.47) | 0.0267*** (3.46) |
| LOSS | 11.6653*** (4.29) | 12.1130*** (4.95) | 13.2885*** (4.30) | 13.5304*** (4.46) |
| LEV | −0.0437 (−0.77) | −0.0213 (−0.60) | −0.0326 (−0.45) | −0.0244 (−0.18) |
| SIZE | 0.0092*** (4.67) | 0.0097*** (3.11) | 0.0097*** (3.14) | 0.0099*** (4.58) |
| ROA | −0.1442 (−0.57) | 0.1236 (1.33) | −0.1784 (−0.79) | −0.0198 (−0.29) |
| GROWTH | −0.0201 (−1.20) | −0.0394 (−0.38) | −0.0259 (−0.69) | −0.0186 (−0.73) |
| AGE | 0.0235*** (4.07) | 0.0208*** (3.76) | 0.0309*** (3.77) | 0.0382*** (4.90) |
| BOARD | 0.0294*** (3.54) | 0.0424*** (3.78) | 0.0176*** (3.26) | |
| IND | −0.0481 (−1.50) | −0.0199 (−0.59) | −0.0179 (−1.05) | |
| BIGS | −0.0431* (−1.99) | −0.0214 (−1.44) | −0.0147 (−1.33) | |
| MO | 0.0377 (0.83) | −0.0366 (−0.95) | 0.0232 (0.68) | |
| VOTE | 0.0155 (0.86) | 0.0175 (0.88) | 0.0217 (1.09) | |
| SSDA | −0.0211 (−0.98) | 0.0257 (0.47) | −0.0345 (−1.16) | |
| CROSS | 0.0137 (0.52) | 0.0207 (0.73) | 0.0185 (0.26) | |
| SUC | 0.0360** (2.63) | 0.0373*** (3.42) | ||
| OUT | 0.0237** (2.53) | |||
| FOUNDER | 0.0066 (0.71) | |||
| Industry fixed effect | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes |
| Adjusted R2 | 15.45 % | 15.57 % | 16.88 % | 16.93 % |
-
The dependent variable is FEPE. Detailed explanations of the variables are provided in Table 1. T ratio is shown in parentheses. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
Table 7 displays the re-analysis of Hypotheses H4, H5, and H6 after excluding industries that did not disclose their future environmental protection expenditures. The regression coefficient of ESFEPE × FAM is positive (3.0590) and significant at the 1 % level, indicating that higher future environmental protection expenditures in family firms are associated with higher firm value, supporting H4. For Hypothesis H5, the coefficient of ESFEPE × SUC is positive (1.7737) and significant at the 5 % level (model 4), suggesting that in family firms, higher future environmental protection costs invested by successor-led firms correspond to higher firm value. Family firms are further categorized into three types: successor chairman (SUC), outsider chairman (OUT), and founder chairman (FOUNDER). Model 6 shows that the coefficient of ESFEPE × SUC is positive (3.1294) and significant at the 1 % level. However, the coefficients for ESFEPE × OUT and ESFEPE × FOUNDER are positive but not significant. These findings indicate that among listed companies in China, future environmental protection expenditures are most valued by investors in family firms with successor chairmen. The supplemental analysis confirms no significant effects for outsider or founder chairmen, suggesting that future environmental protection disclosures by successor-led family firms enhance firm value, supporting H6. The findings highlight differences in the impact of environmental protection expenditures on firm value across the three types of family firms.
The relationship between different types of family firms, their future environmental protection expenditure, and firm value (the sample excludes industries that did not disclose their future environmental protection expenditures).
| Variable | All samples | Family firms | All samples | |||
|---|---|---|---|---|---|---|
| FEPE | TOBINQ | FEPE | TOBINQ | FEPE | TOBINQ | |
| Model 1 | Model 2 | Model 3 | Model 4 | Model 5 | Model 6 | |
| PIND | 0.0433*** | 0.0228*** | 0.0433*** | |||
| LOSS | 13.2207*** | 14.1090** | 13.2207*** | |||
| LEV | −0.0219** | −0.2201** | −0.0440 | −0.0406 | −0.0219** | −0.4124** |
| SIZE | 0.0199*** | 0.1513*** | 0.0409** | 0.1093*** | 0.0199*** | 0.1348*** |
| ROA | 0.0283 | 20.1564** | −0.0133 | 20.1834** | 0.0283 | 21.7443** |
| GROWTH | 0.0177 | 0.2108*** | 0.0408 | 0.3791** | 0.0177 | 0.1410*** |
| AGE | 0.0219*** | −0.3300** | 0.0914* | −0.2029*** | 0.0219*** | −0.0468*** |
| BOARD | 0.0452*** | −0.2267 | 0.0099*** | −0.1098 | 0.0452*** | −0.1094 |
| IND | −0.0839** | −0.3106** | −0.0271 | −0.1408 | −0.0839** | −0.3104** |
| BIGS | −0.0211** | 0.7407** | −0.1480* | 0.8335** | −0.0211** | 0.5004** |
| MO | 0.0506 | 1.1096 | −0.0417 | 4.1592** | 0.0506 | 1.2000 |
| VOTE | 0.0224 | −0.1305 | 0.0210 | 0.3117 | 0.0224 | −0.6110 |
| SSDA | −0.0389** | 0.2118 | −0.0200 | −0.3009 | −0.0389** | 0.5707 |
| CROSS | 0.0205** | −0.1095** | 0.0178 | −0.1433*** | 0.0205** | −0.3945** |
| PPE | 0.0419*** | 0.1940* | 0.0400* | 0.2651 | 0.0419*** | 0.4548* |
| CUR | 0.0237 | 0.0964** | 0.0165 | 0.0227*** | 0.0237 | 0.0406** |
| HHI | 0.6490*** | −0.2090 | 1.1047** | −3.5044*** | 0.6490*** | −0.5460 |
| ESFEPE | −4.0494*** | −1.9553** | −4.6275** | |||
| FAM | −0.0843 | |||||
| ESFEPE × FAM | 3.0590*** | |||||
| SUC | −0.5184*** | −0.2095*** | ||||
| ESFEPE × SUC | 1.7737** | 3.1294*** | ||||
| OUT | 0.1205 | |||||
| ESFEPE × OUT | 3.1639 | |||||
| FOUNDER | −0.1007*** | |||||
| ESFEPE × FOUNDER | 1.0466 | |||||
| Industry fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effect | Yes | Yes | Yes | Yes | Yes | Yes |
| First-stage F statistic (PIND, LOSS) | 18.73*** | 16.45*** | 18.11*** | |||
| Adjusted R2 | 16.18 % | 35.22 % | 17.78 % | 39.06 % | 16.18 % | 39.44 % |
-
Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
In summary, these results support the study’s hypotheses, demonstrating that the main regression findings remain robust even after excluding industries with no environmental protection expenditures.
5.2 Heckman Two-Stage Model
Sample selection bias occurs when certain observations are systematically excluded based on specific criteria, leading to biased estimates. This study recognizes the potential for such bias in the disclosure of future environmental protection expenditures, as decisions may depend on factors like company policies or industry characteristics (e.g. high-pollution industries being more likely to disclose). To address this, a two-stage estimation approach was used. First, a probit regression model (Model 1 in Table 8) calculated the inverse Mills ratio for each company, which was included in the model to control for self-selection bias. Second, the Heckman two-stage model was applied, with the empirical analysis based on model 2 (Table 8).
Heckman two-stage regression results.
| Variable | The first stage (model 1) | The second stage (model 2) |
|---|---|---|
| FEPE-dummy | TOBINQ | |
| PIND | 0.3992** | |
| LOSS | 42.1046** | |
| LEV | −0.3452* | −0.2183* |
| SIZE | 0.2145** | 0.2323* |
| ROA | −5.1276*** | 10.1224** |
| GROWTH | −0.0495 | 0.3001** |
| AGE | 0.5894** | −0.211** |
| BOARD | −0.1200 | |
| IND | 0.1664 | |
| BIGS | 1.0200*** | |
| MO | 2.0499 | |
| VOTE | −0.0094 | |
| SSDA | −0.0694 | |
| CROSS | −0.0099 | |
| PPE | 0.2235** | |
| CUR | 0.0748*** | |
| HHI | −1.0298 | |
| FEPE | −0.6557** | |
| FAM | −0.1405** | |
| FAM x FEPE | 0.6678** | |
| MILLSRATIO | 0.4108** | |
| Industry fixed effect | Yes | Yes |
| Year fixed effect | Yes | Yes |
| First-stage F statistic (PIND, LOSS) | 13.48*** | |
| Adjusted R2 | 46.27 % |
-
FEPE-dummy equals 1 if the company discloses its future investment in environmental protection; otherwise, it equals 0. Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
In the empirical model 1, the dependent variable, FEPE-dummy, is a binary variable for environmental protection expenditure. FEPE-dummy equals 1 if the company discloses its future investment in environmental protection; otherwise, it equals 0. Table 8 presents the empirical results of the Heckman two-stage model (Heckman 1979). The significant coefficient of MILLSRATIO confirms the presence of self-selection bias. The regression coefficient of FAM × FEPE is positive (0.6678) and statistically significant at the 5 % level, indicating that higher future environmental protection expenditures in family firms are associated with increased corporate value. This finding supports the inference of Hypothesis H4. Moreover, the results demonstrate that, even after accounting for self-selection bias in environmental information disclosure, the empirical findings for Hypothesis H4 remain consistent with the main regression analysis.
5.3 The Firm Fixed Effect Replaces the Industry Fixed Effect
To control for unobserved heterogeneity at the firm level, this section replaces the industry fixed effects with firm fixed effects in the regression models for testing Hypotheses H4, H5, and H6. This robustness checks addresses potential concerns that firm-specific characteristics-such as corporate culture, managerial capabilities, or strategic priorities-might influence both environmental expenditure and firm value, independently of industry-level factors. The use of firm fixed effects enables the model to absorb all time-invariant firm-level characteristics that could bias the estimation. While industry fixed effects account for systematic differences across industries (e.g. pollution intensity, regulation), they may fail to capture variation stemming from firm-specific strategies or governance practices. By contrast, firm fixed effects allow for a more stringent control of internal, unobservable attributes that remain constant over time within a firm but vary across firms.
However, firm fixed effects are not included in the baseline models because they can absorb much of the variation of key variables of interest, especially when the variation in independent variables is more between firms than within firms over time. Moreover, including firm fixed effects in all specifications can substantially reduce degrees of freedom and statistical power in unbalanced panel data, particularly when using interaction terms or examining subgroups like family vs. non-family firms. Therefore, the main analysis relies on industry fixed effects for broader generalizability, while the firm fixed effects are used here as a robustness check.
Comparing firm and industry fixed effects: Industry fixed effects capture average structural factors within sectors, such as environmental regulation or technology intensity. Firm fixed effects provide more granular control by removing all time-invariant differences between individual firms. The choice between them depends on the research question: For causal inference regarding within-firm changes over time, firm fixed effects are often preferred; for assessing cross-sectional patterns, industry fixed effects are more efficient.
In this study, both types of fixed effects are applied in separate models to ensure robustness. The consistent results across these specifications provide further confidence in the validity of the findings.
Table 9 presents the regression results after controlling for fixed effects. In model 1, the regression coefficient of FAM × FEPE is 0.4997 and significant at the 1 % level. This indicates that greater future environmental protection expenditure by family firms is associated with higher firm value, supporting Hypothesis H4. In model 2 and 3, the regression coefficients of SUC × FEPE are positive and significant, at 0.2675 and 0.3309, respectively. However, the coefficients for OUT × FEPE and FOUNDER × FEPE are not statistically significant. These findings suggest that, among listed companies in China, family firms led by successors investing more in environmental protection are rewarded by investors. Conversely, no significant impact on corporate value is observed for family firms led by outsider or founder chairmen when environmental expenditures increase. These results continue to support Hypotheses H5 and H6, indicating differences in the effects of future environmental protection expenditures across the three types of family firms. The findings in Table 9, consistent with the main regression results, further validate the inferences of this study after controlling for firm fixed effects.
Regression results on family firms’ future environmental protection expenditures and corporate value after controlling for firm fixed effects.
| Variable | TOBINQ | ||
|---|---|---|---|
| All samples | Family firms | All samples | |
| Model 1 | Model 2 | Model 3 | |
| LEV | −0.1043* | −0.1335* | −0.3178** |
| SIZE | 0.1104*** | 0.2174*** | 0.1649*** |
| ROA | 18.3340* | 20.3044** | 21.5543* |
| GROWTH | 0.1596* | 0.1225* | 0.1985* |
| AGE | −0.2067** | −0.3158*** | −0.4652*** |
| BOARD | −0.1100 | 0.0205 | −0.1790 |
| IND | −0.2357 | −0.1546 | −0.2764 |
| BIGS | 0.6449*** | 0.6327*** | 0.7009*** |
| MO | 2.0595*** | 3.2534*** | 0.7657** |
| VOTE | −0.4603** | −0.0748 | −0.1387 |
| SSDA | 0.4052* | −0.0780 | 0.4110* |
| CROSS | −0.1502*** | −0.1353*** | −0.1008*** |
| PPE | 0.3136*** | 0.4568** | 0.3348** |
| CUR | 0.2164*** | 0.0786*** | 0.0221*** |
| HHI | −2.0951*** | −4.7125** | −2.3376** |
| FEPE | −0.8501** | −0.3539*** | −0.4343*** |
| FAM | −0.0188 | ||
| FAM × FEPE | 0.4997*** | ||
| SUC | −0.1563*** | −0.1338*** | |
| SUC x FEPE | 0.2675*** | 0.3309** | |
| OUT | 0.0554** | ||
| OUT × FEPE | −0.1553 | ||
| FOUNDER | −0.0769 | ||
| FOUNDER × FEPE | −0.1540 | ||
| Firm Fixed Effect | Yes | Yes | Yes |
| Year Fixed Effect | Yes | Yes | Yes |
| Adjusted R2 | 33.32 % | 36.10 % | 34.63 % |
-
The dependent variable is TOBINQ. Detailed explanations of the variables are provided in Table 1. *; **; *** correspond to statistical significance levels of 10 %, 5 %, and 1 %, respectively.
6 Discussion
This study investigates the relationship between future environmental protection expenditures and firm value in the context of Chinese listed family firms. The empirical findings show that family firms – especially those led by successors – allocate more resources to future environmental protection compared to non-family firms, and such investments are positively associated with firm value. These results are consistent with the socioemotional wealth (SEW) theory, which emphasizes that family firms often prioritize non-financial goals such as family reputation, legacy, and long-term sustainability (Berrone et al. 2012; Ng et al. 2022).
Compared with previous studies, this research extends the literature in several ways. While some studies have found that family firms underperform in CSR-related environmental initiatives due to concerns about cost and low transparency (e.g. Abeysekera and Fernando 2020; Fan et al. 2021), our findings suggest that such generalizations may overlook the importance of leadership structure. Specifically, family firms with successors as chairmen tend to demonstrate a stronger commitment to environmental investments than those led by founders or external professionals. This indicates that leadership transition plays a crucial role in shaping environmental strategies in family firms.
From a practical standpoint, the results offer meaningful implications. For policymakers, promoting ESG disclosure policies and emphasizing environmental responsibility in corporate governance frameworks could encourage firms – particularly family-owned businesses – to strengthen their sustainability practices. For investors, identifying family firms with successor leadership may help signal long-term value orientation and reduced environmental risk. Moreover, the findings should be interpreted in light of the unique cultural and institutional context of China. Confucian values, which emphasize intergenerational responsibility, filial piety, and social harmony, are deeply embedded in the governance philosophy of Chinese family firms. Successors, often viewed as stewards of family legacy, may place greater emphasis on environmental protection not only to preserve firm value but also to maintain social legitimacy and uphold family honor. This cultural dimension helps explain why successor-led family firms are more proactive in disclosing and investing in environmental initiatives.
This study contributes to the literature by highlighting the nuanced role of leadership succession in driving environmental investment behavior in family firms. It also underscores the importance of considering cultural characteristics when evaluating the effectiveness and intent of sustainability strategies in emerging markets.
7 Conclude and Recommendations
This study investigates the relationship between future environmental protection expenditures and firm value, focusing on Chinese listed family firms over the period 2015–2020. The empirical findings, based on rigorous econometric techniques including two-stage least squares (2SLS) estimation and robustness checks such as the Heckman correction, reveal that family firms, particularly those led by successor chairpersons, tend to invest significantly more in future environmental protection compared to their non-family counterparts. Furthermore, these investments are positively associated with firm value, especially in the context of successor-led governance, suggesting that environmental spending serves as a credible signal of long-term commitment and corporate responsibility. This study contributes to the existing literature by highlighting the nuanced role of leadership structure in shaping sustainability strategies within family firms and supports the socioemotional wealth perspective, wherein successors are more inclined to uphold family reputation and ensure intergenerational continuity through proactive environmental engagement. The findings have important implications for firm managers, policymakers, and investors. Family firms are encouraged to incorporate environmental objectives into their strategic vision, especially during succession, while policymakers should tailor ESG disclosure frameworks to account for governance heterogeneity in ownership structures. For investors, disclosed future environmental expenditures may serve as a useful indicator of a firm’s long-term value orientation and commitment to sustainability. Overall, this research underscores the importance of integrating environmental investment into the governance architecture of family firms, offering a foundation for future studies on sustainability transitions in emerging markets.
Acknowledgments
I would like to express my sincere gratitude to Mr. Huang Lie Wan, a Ph.D. student at Peking University, and Mr. Hung Tran from Feng Chia University for their invaluable support in data collection. I am also deeply grateful to Professor Huan-Yi Li from National Changhua University of Education and Professor Ming-Chin Chen from National Chengchi University, whose research has been a great source of inspiration for my study.
-
Funding information: This research is funded by Ho Chi Minh University of Banking.
-
Author contribution: The author confirms sole responsibility for the following: study conception and design, data collection, analysis and interpretation of results, and manuscript preparation.
-
Conflict of interest: The authors declare that they have no competing interests.
-
Data availability statements: The dataset was obtained at significant expense and will be shared by the author for a reasonable request.
Appendix A. Sample Industry Distribution
| No | Industry | Family firm | Non-family firm | All samples |
|---|---|---|---|---|
| 1 | Cement | 196 | 154 | 350 |
| 2 | Food | 445 | 148 | 593 |
| 3 | Plastic | 91 | 121 | 212 |
| 4 | Textile | 254 | 198 | 452 |
| 5 | Electrical Cables | 190 | 201 | 391 |
| 6 | Electrical Machinery | 91 | 115 | 206 |
| 7 | Paper | 122 | 101 | 223 |
| 8 | Iron and Steel Industry | 124 | 87 | 211 |
| 9 | Rubber | 126 | 98 | 224 |
| 10 | Automobile | 67 | 100 | 167 |
| 11 | Building Materials and Construction | 98 | 95 | 193 |
| 12 | Shipping | 173 | 204 | 377 |
| 13 | Tourism | 165 | 177 | 342 |
| 14 | General Merchandise | 180 | 184 | 364 |
| 15 | Chemical industry | 140 | 113 | 253 |
| 16 | Biotechnology and medical | 149 | 98 | 247 |
| 17 | Oil, electricity, gas | 80 | 148 | 228 |
| 18 | Semiconductor industry | 91 | 156 | 247 |
| 19 | Computer and peripheral equipment | 136 | 124 | 260 |
| 20 | Communication network industry | 234 | 105 | 339 |
| 21 | Information services industry | 283 | 74 | 357 |
| 22 | Agriculture | 334 | 76 | 410 |
| 23 | technology | 93 | 87 | 180 |
| 24 | E-commerce | 322 | 56 | 378 |
| Total | 4,184 | 3,020 | 7,204 |
Appendix B. Correlation Matrix
| FEPE | FAM | PIND | LOSS | LEV | SIZE | ROA | GROWTH | AGE | BOARD | IND | BIGS | MO | VOTE | SSDA | CROSS | SUC | OUT | FOUNDER | PPE | CUR | HHI | TOBINQ | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FEPE | 1 | ||||||||||||||||||||||
| FAM | 0.01 | 1 | |||||||||||||||||||||
| PIND | 0.04 | 0.08 | 1 | ||||||||||||||||||||
| LOSS | −0.19 | −0.15 | −0.26 | 1 | |||||||||||||||||||
| LEV | 0.04 | 0.06 | 0.09 | −0.01 | 1 | ||||||||||||||||||
| SIZE | −0.02 | −0.23 | −0.20 | 0.20 | −0.06 | 1 | |||||||||||||||||
| ROA | 0.05 | 0.09 | 0.10 | −0.05 | 0.04 | −0.07 | 1 | ||||||||||||||||
| GROWTH | −0.05 | −0.00 | −0.04 | 0.08 | −0.05 | 0.23 | −0.30 | 1 | |||||||||||||||
| AGE | 0.03 | 0.01 | 0.05 | −0.00 | 0.06 | −0.19 | 0.00 | −0.08 | 1 | ||||||||||||||
| BOARD | 0.27 | 0.04 | 0.08 | −0.07 | 0.03 | −0.05 | 0.05 | −0.03 | 0.06 | 1 | |||||||||||||
| IND | 0.00 | 0.22 | 0.03 | −0.30 | 0.05 | −0.27 | 0.23 | −0.06 | 0.03 | 0.07 | 1 | ||||||||||||
| BIGS | −0.06 | −0.06 | −0.23 | 0.08 | −0.08 | 0.03 | −0.01 | 0.23 | −0.01 | −0.03 | −0.06 | 1 | |||||||||||
| MO | 0.08 | 0.09 | 0.01 | −0.00 | 0.07 | −0.13 | 0.08 | −0.05 | 0.08 | 0.06 | 0.12 | −0.07 | 1 | ||||||||||
| VOTE | 0.06 | 0.10 | 0.09 | −0.25 | 0.03 | −0.14 | 0.15 | −0.04 | 0.06 | 0.23 | 0.33 | −0.02 | 0.01 | 1 | |||||||||
| SSDA | −0.02 | −0.02 | −0.03 | 0.06 | −0.04 | 0.08 | −0.06 | 0.07 | −0.20 | −0.17 | −0.04 | 0.02 | −0.17 | −0.03 | 1 | ||||||||
| CROSS | 0.09 | 0.21 | 0.03 | −0.08 | 0.09 | −0.04 | 0.09 | −0.19 | 0.05 | 0.09 | 0.19 | −0.05 | 0.02 | 0.01 | −0.04 | 1 | |||||||
| SUC | 0.09 | 0.08 | 0.25 | −0.03 | 0.02 | −0.13 | 0.09 | −0.04 | 0.08 | 0.08 | 0.03 | −0.04 | 0.09 | 0.04 | −0.03 | 0.10 | 1 | ||||||
| OUT | 0.20 | 0.23 | 0.09 | −0.05 | 0.09 | −0.07 | 0.01 | −0.05 | 0.09 | 0.00 | 0.09 | −0.35 | 0.28 | 0.05 | −0.15 | 0.09 | 0.09 | 1 | |||||
| FOUNDER | −0.17 | −0.08 | −0.25 | 0.01 | −0.04 | 0.00 | −0.11 | 0.38 | −0.09 | −0.26 | −0.07 | 0.15 | −0.04 | −0.27 | 0.06 | −0.08 | −0.04 | −0.06 | 1 | ||||
| PPE | −0.08 | −0.01 | −0.04 | 0.17 | −0.20 | 0.00 | −0.17 | 0.05 | −0.01 | −0.00 | −0.04 | 0.07 | −0.08 | −0.19 | 0.14 | −0.05 | −0.07 | −0.08 | 0.12 | 1 | |||
| CUR | −0.09 | −0.09 | −0.08 | 0.24 | −0.03 | 0.19 | −0.08 | 0.12 | −0.08 | −0.09 | −0.07 | 0.09 | −0.01 | −0.08 | 0.11 | −0.06 | −0.01 | −0.15 | 0.00 | 0.08 | 1 | ||
| HHI | −0.16 | −0.07 | −0.07 | 0.00 | −0.04 | 0.04 | −0.01 | 0.25 | −0.09 | −0.01 | −0.02 | 0.24 | −0.08 | −0.03 | 0.07 | −0.08 | −0.05 | −0.02 | 0.08 | 0.24 | 0.23 | 1 | |
| TOBINQ | 0.02 | 0.10 | 0.08 | −0.11 | 0.07 | −0.09 | 0.07 | −0.04 | 0.00 | 0.02 | 0.00 | −0.05 | 0.06 | 0.20 | −0.06 | 0.08 | 0.09 | 0.05 | −0.00 | −0.15 | −0.17 | −0.03 | 1 |
References
Abeysekera, A. P., and C. S. Fernando. 2020. “Corporate Social Responsibility Versus Corporate Shareholder Responsibility: A Family Firm Perspective.” Journal of Corporate Finance 61: 101370. https://doi.org/10.1016/j.jcorpfin.2018.05.003.Search in Google Scholar
Agostino, M., and S. Ruberto. 2021. “Environment-Friendly Practices: Family Versus Non-family Firms.” Journal of Cleaner Production 329: 129689. https://doi.org/10.1016/j.jclepro.2021.129689.Search in Google Scholar
Al Rawaf, R. A., and A. A. Alfalih. 2023. “The Role of Governance in Achieving Sustainability in family-owned Business: Do Responsible Innovation and Entrepreneurial Culture Matter?” Sustainability 15 (7): 5647. https://doi.org/10.3390/su15075647.Search in Google Scholar
Alberts, I. 2018. Passing the Torch: Preserving Family Wealth Beyond the Third Generation. John Wiley & Sons.10.1002/9781119486466Search in Google Scholar
Al-Tuwaijri, S. A., T. E. Christensen, and K. E. Hughes II. 2004. “The Relations Among Environmental Disclosure, Environmental Performance, and Economic Performance: A Simultaneous Equations Approach.” Accounting, Organizations and Society 29 (5–6): 447–71. https://doi.org/10.1016/s0361-3682(03)00032-1.Search in Google Scholar
Anderson, R. C., and D. M. Reeb. 2003. “Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500.” The Journal of Finance 58 (3): 1301–28.10.1111/1540-6261.00567Search in Google Scholar
Ang, R., Z. Shao, C. Liu, C. Yang, and Q. Zheng. 2022. “The Relationship Between CSR and Financial Performance and the Moderating Effect of Ownership Structure: Evidence from Chinese Heavily Polluting Listed Enterprises.” Sustainable Production and Consumption 30: 117–29. https://doi.org/10.1016/j.spc.2021.11.030.Search in Google Scholar
Baalouch, F., S. D. Ayadi, and K. Hussainey. 2019. “A Study of the Determinants of Environmental Disclosure Quality: Evidence from French Listed Companies.” Journal of Management and Governance 23 (4): 939–71. https://doi.org/10.1007/s10997-019-09474-0.Search in Google Scholar
Baek, H. Y., and D. Cho. 2017. “Family Firm Succession and Performance.” Applied Economics Letters 24 (2): 117–21. https://doi.org/10.1080/13504851.2016.1167822.Search in Google Scholar
Basco, R. 2013. “The Family’s Effect on Family Firm Performance: A Model Testing the Demographic and Essence Approaches.” Journal of Family Business Strategy 4 (1): 42–66. https://doi.org/10.1016/j.jfbs.2012.12.003.Search in Google Scholar
Bendell, B. L. 2022. “Environmental Investment Decisions of Family Firms – An Analysis of Competitor and Government Influence.” Business Strategy and the Environment 31 (1): 1–14. https://doi.org/10.1002/bse.2870.Search in Google Scholar
Bennedsen, M., J. P. H. Fan, M. Jian, and Y. H. Yeh. 2015. “The Family Business Map: Framework, Selective Survey, and Evidence from Chinese Family Firm Succession.” Journal of Corporate Finance 33: 212–26. https://doi.org/10.1016/j.jcorpfin.2015.01.008.Search in Google Scholar
Bennedsen, M., Y. C. Lu, and V. Mehrotra. 2022. “A Survey of Asian Family Business Research.” Asia‐Pacific Journal of Financial Studies 51 (1): 7–43. https://doi.org/10.1111/ajfs.12363.Search in Google Scholar
Berrone, P., C. Cruz, and L. R. Gomez-Mejia. 2012. “Socioemotional Wealth in Family Firms: Theoretical Dimensions, Assessment Approaches and Agenda for Future Research.” Family Business Review 25 (3): 258–79. https://doi.org/10.1177/0894486511435355.Search in Google Scholar
Bertrand, M., S. Johnson, K. Samphantharak, and A. Schoar. 2008. “Mixing Family with Business: A Study of Thai Business Groups and the Families Behind them.” Journal of Financial Economics 88 (3): 466–98. https://doi.org/10.1016/j.jfineco.2008.04.002.Search in Google Scholar
Binacci, M., E. Peruffo, R. Oriani, and A. Minichilli. 2016. “Are all Non‐Family Managers (NFMs) Equal? the Impact of NFM Characteristics and Diversity on Family Firm Performance.” Corporate Governance: An International Review 24 (6): 569–83. https://doi.org/10.1111/corg.12130.Search in Google Scholar
Block, J. H., and M. Wagner. 2014. “The Effect of Family Ownership on Different Dimensions of Corporate Social Responsibility: Evidence from Large US Firms.” Business Strategy and the Environment 23 (7): 475–92. https://doi.org/10.1002/bse.1798.Search in Google Scholar
Cai, L., and C. He. 2014. “Corporate Environmental Responsibility and Equity Prices.” Journal of Business Ethics 125 (4): 617–35. https://doi.org/10.1007/s10551-013-1935-4.Search in Google Scholar
Cao, J., S. Xie, X. Xiong, Z. Zou, and X. Gong. 2025. “Can Corporate Social Responsibility Mitigate Systemic Risk? Evidence from China.” China Finance Review International. https://doi.org/10.1108/cfri-03-2025-0098.Search in Google Scholar
Chi, H. Y., T. C. Weng, G. Z. Chen, and S. P. Chen. 2019. “Do Political Connections Affect the Conservative Financial Reporting of Family Firms?” Sustainability 11 (20): 5563. https://doi.org/10.3390/su11205563.Search in Google Scholar
Chung, K. H., and S. W. Pruitt. 1996. “Executive Ownership, Corporate Value, and Executive Compensation: A Unifying Framework.” Journal of Banking & Finance 20 (7): 1135–59. https://doi.org/10.1016/0378-4266(95)00039-9.Search in Google Scholar
Cruz, C., M. Larraza–Kintana, L. Garcés–Galdeano, and P. Berrone. 2014. “Are Family Firms Really More Socially Responsible?” Entrepreneurship Theory and Practice 38 (6): 1295–316. https://doi.org/10.1111/etap.12125.Search in Google Scholar
Dai, Z., and Q. Jiang. 2025. “Climate Policy Uncertainty and Corporate ESG Performance: Evidence from Chinese Listed Companies.” China Finance Review International 15 (3): 578–607. https://doi.org/10.1108/cfri-05-2024-0272.Search in Google Scholar
Dewangan, S., S. Kumar, P. Chatterjee, and A. Dhiraj. 2024. “A Conceptual Model for Exploring Innovation in Family Firms: Integration of Socio-emotional Wealth and Resource-based Theory Perspectives.” In Entrepreneurial Behaviour of Family Firms: Perspectives on Emerging Economies, 183–205. Emerald Publishing Limited.10.1108/978-1-83753-934-520241009Search in Google Scholar
Dou, J., E. Su, and S. Wang. 2019. “When Does Family Ownership Promote Proactive Environmental Strategy? the Role of the Firm’s Long-Term Orientation.” Journal of Business Ethics 158 (1): 81–95. https://doi.org/10.1007/s10551-017-3642-z.Search in Google Scholar
Du, S., and J. Cao. 2023. “Non-Family Shareholder Governance and Green Innovation of Family Firms: A socio-emotional Wealth Theory Perspective.” International Review of Financial Analysis 90: 102857. https://doi.org/10.1016/j.irfa.2023.102857.Search in Google Scholar
Ehikioya, B. I. 2009. “Corporate Governance Structure and Firm Performance in Developing Economies: Evidence from Nigeria.” Corporate Governance: International Journal of Business in Society 9 (3): 231–43. https://doi.org/10.1108/14720700910964307.Search in Google Scholar
Eng, L. L., M. Fikru, and T. Vichitsarawong. 2022. “Comparing the Informativeness of Sustainability Disclosures Versus ESG Disclosure Ratings.” Sustainability Accounting, Management and Policy Journal 13 (2): 494–518. https://doi.org/10.1108/sampj-03-2021-0095.Search in Google Scholar
Fan, Y., F. Zhang, and L. Zhu. 2021. “Do Family Firms Invest More in Pollution Prevention Strategy than Non-Family Firms? an Integration of Agency and Institutional Theories.” Journal of Cleaner Production 286: 124988. https://doi.org/10.1016/j.jclepro.2020.124988.Search in Google Scholar
Firth, M., P. M. Fung, and O. M. Rui. 2006. “Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy.” Journal of Management Studies 43 (6): 1289–330. https://doi.org/10.1111/j.1467-6486.2006.00621.x.Search in Google Scholar
Hassel, L., H. Nilsson, and S. Nyquist. 2005. “The Value Relevance of Environmental Performance.” European Accounting Review 14 (1): 41–61. https://doi.org/10.1080/0963818042000279722.Search in Google Scholar
Heckman, J. J. 1979. “Sample Selection Bias as A Specification Error.” Econometrica 47 (1): 153–61. https://doi.org/10.2307/1912352.Search in Google Scholar
Hosain, M. S. 2025. “Corporate Board Characteristics and CSR Budget of Selected Bangladeshi Banks: Moderating Role of Corporate Reputation.” Asian Journal of Economics and Banking 9 (1): 126–43. https://doi.org/10.1108/ajeb-08-2023-0083.Search in Google Scholar
Huang, L., and A. Chen. 2024. “Family Business Succession and Corporate ESG Behavior.” Finance Research Letters 60: 104901. https://doi.org/10.1016/j.frl.2023.104901.Search in Google Scholar
Jiang, F., W. Shi, and X. Zheng. 2020. “Board Chairs and R&D Investment: Evidence from Chinese Family-Controlled Firms.” Journal of Business Research 112: 109–18.10.1016/j.jbusres.2020.02.026Search in Google Scholar
Kaur, J. 2021. “Proactive Versus Reactive Environmental Management and Profitability of Indian Firms: The Moderating Effects of Environmental Cost-Efficiency and Environmental Liability.” Environmental Challenges 5: 100298. https://doi.org/10.1016/j.envc.2021.100298.Search in Google Scholar
Khurshid, A., Y. Hongbin, J. Cifuentes‐Faura, and S. F. Saleem. 2025. “Does Corporate Social Responsibility and Environmental Governance Drive Green Innovation?” Corporate Social Responsibility and Environmental Management 32 (1): 58–70. https://doi.org/10.1002/csr.2942.Search in Google Scholar
Leiß, G., and A. Zehrer. 2018. “Intergenerational Communication in Family Firm Succession.” Journal of Family Business Management 8 (1): 75–90. https://doi.org/10.1108/jfbm-09-2017-0025.Search in Google Scholar
Li, H. Y., and M. C. Chen. 2024. “The Disclosure of Environmental Expenditures of Family Firms and its Economic Consequences.” Sun Yat-Sen Management Review 32 (4): 577–631.Search in Google Scholar
Lin, Y., R. Huang, and X. Yao. 2021. “Air Pollution and Environmental Information Disclosure: An Empirical Study Based on Heavy Polluting Industries.” Journal of Cleaner Production 278: 124313. https://doi.org/10.1016/j.jclepro.2020.124313.Search in Google Scholar
Liu, F., Y. Kang, K. Guo, and X. Sun. 2021. “The Relationship Between Air Pollution, Investor Attention and Stock Prices: Evidence from New Energy and Polluting Sectors.” Energy Policy 156: 112430. https://doi.org/10.1016/j.enpol.2021.112430.Search in Google Scholar
Liu, F., W. Huang, J. Zhang, and M. Fang. 2024. “Corporate Social Responsibility in Family Business: Using Machine Learning to Uncover who is Doing Good.” Technology in Society 76: 102453. https://doi.org/10.1016/j.techsoc.2024.102453.Search in Google Scholar
Luu, Q. T., and K. D. Dang. 2023. “Trading Behavior of Institutional Investors and Ceo’s Market Timing.” Asia Pacific Management Review 28 (1): 69–80. https://doi.org/10.1016/j.apmrv.2022.03.002.Search in Google Scholar
Muskat, B., and A. Zehrer. 2017. “A Power Perspective on Knowledge Transfer in Internal Succession of Small Family Businesses.” Journal of Small Business & Entrepreneurship 29 (5): 333–50. https://doi.org/10.1080/08276331.2017.1345208.Search in Google Scholar
Neffe, C., C. P. Wilderom, and F. Lattuch. 2020. “Leader Behaviours of Family and Non-family Executives in Family Firms.” Management Research Review 43 (7): 885–907. https://doi.org/10.1108/mrr-12-2018-0468.Search in Google Scholar
Ng, P. Y., M. Dayan, and M. Makri. 2022. “Influence of Socioemotional Wealth on Non-Family Managers’ Risk Taking and Product Innovation in Family Businesses.” Cross Cultural & Strategic Management 29 (2): 297–319. https://doi.org/10.1108/ccsm-03-2021-0058.Search in Google Scholar
Noor, S., A. Saeed, M. S. Baloch, and M. Awais. 2020. “CSR Permanency, Family Ownership, and Firm Value: Evidence from Emerging Economies.” Corporate Social Responsibility and Environmental Management 27 (5): 2135–49. https://doi.org/10.1002/csr.1953.Search in Google Scholar
Plumlee, M., D. Brown, R. M. Hayes, and R. S. Marshall. 2015. “Voluntary Environmental Disclosure Quality and Firm Value: Further Evidence.” Journal of Accounting and Public Policy 34 (4): 336–61. https://doi.org/10.1016/j.jaccpubpol.2015.04.004.Search in Google Scholar
Shahzad, M., Y. Qu, S. A. Javed, A. U. Zafar, and S. U. Rehman. 2020. “Relation of Environment Sustainability to CSR and Green Innovation: A Case of Pakistani Manufacturing Industry.” Journal of Cleaner Production 253: 119938. https://doi.org/10.1016/j.jclepro.2019.119938.Search in Google Scholar
Smith, M. 2007. ““Real” Managerial Differences Between Family and Non‐Family Firms.” International Journal of Entrepreneurial Behavior & Research 13 (5): 278–95. https://doi.org/10.1108/13552550710780876.Search in Google Scholar
Srinidhi, B. N., S. He, and M. Firth. 2014. “The Effect of Governance on Specialist Auditor Choice and Audit Fees in US Family Firms.” The Accounting Review 89 (6): 2297–329. https://doi.org/10.2308/accr-50840.Search in Google Scholar
Staiger, D. O., and J. H. Stock. 1997. “Instrumental Variables Regression with Weak Instruments.” Econometrica 65 (3): 557–86. https://doi.org/10.2307/2171753.Search in Google Scholar
Stanonik, G. 2024. Leadership Development Strategy for Successors in Family Businesses. Doctoral dissertation. Technische Universität Wien.Search in Google Scholar
Tang, T., and L. Yang. 2024. “Shaping Corporate ESG Performance: Role of Social Trust in China’s Capital Market.” China Finance Review International 14 (1): 34–75. https://doi.org/10.1108/cfri-07-2023-0187.Search in Google Scholar
Tang, H., M. Tong, and Y. Chen. 2024. “Green Investor Behavior and Corporate Green Innovation: Evidence from Chinese Listed Companies.” Journal of Environmental Management 366: 121691. https://doi.org/10.1016/j.jenvman.2024.121691.Search in Google Scholar
Weng, T. C., and H. Y. Chi. 2019. “Family Succession and Business Diversification: Evidence from China.” Pacific-Basin Finance Journal 53: 56–81. https://doi.org/10.1016/j.pacfin.2018.09.001.Search in Google Scholar
Xu, N., Q. Yuan, X. Jiang, and K. C. Chan. 2015. “Founder’s Political Connections, Second Generation Involvement, and Family Firm Performance: Evidence from China.” Journal of Corporate Finance 33: 243–59. https://doi.org/10.1016/j.jcorpfin.2015.01.004.Search in Google Scholar
Xu, X., S. Zeng, and H. Chen. 2018. “Signaling Good by Doing Good: How Does Environmental Corporate Social Responsibility Affect International Expansion?” Business Strategy and the Environment 27 (7): 946–59. https://doi.org/10.1002/bse.2044.Search in Google Scholar
Ye, B., and J. Yuan. 2008. “Firm Value, Managerial Confidence, and Investments: The Case of China.” Journal of Leadership Studies 2 (3): 26–36. https://doi.org/10.1002/jls.20072.Search in Google Scholar
Yoo, S. S., M. T. Schenkel, and J. Kim. 2014. “Examining the Impact of Inherited Succession Identity on Family Firm Performance.” Journal of Small Business Management 52 (2): 246–65. https://doi.org/10.1111/jsbm.12098.Search in Google Scholar
Zhang, P., F. Wu, Y. Guo, and J. Ma. 2022. “Does Enforcement Matter in Promoting Corporate Environmental Investment: Evidence from Chinese Private Firms.” Journal of Cleaner Production 337: 130432. https://doi.org/10.1016/j.jclepro.2022.130432.Search in Google Scholar
Zhou, H., Q. Wang, and X. Zhao. 2020. “Corporate Social Responsibility and Innovation: A Comparative Study.” Industrial Management & Data Systems 120 (5): 863–82. https://doi.org/10.1108/imds-09-2019-0493.Search in Google Scholar
Supplementary Material
This article contains supplementary material (https://doi.org/10.1515/econ-2025-0180).
© 2026 the author(s), published by De Gruyter, Berlin/Boston
This work is licensed under the Creative Commons Attribution 4.0 International License.
Articles in the same Issue
- Review Articles
- Professional Development of ESP Teachers for Digital Transformation: Approaches, Challenges, and Policy Implications
- How Does the Adoption of Generative AI Affect the Speed of Strategic Decision-Making and Innovation Performance in SMEs?
- Research Articles
- Family vs. Non-Family Firms: Linking Future Environmental Expenditures to Firm Value
- The Dynamic Association of Economic Policy Uncertainty, Short-Term Cross-Border Capital Flows and Systemic Financial Risk
- On- and Off-Chain Demand and Supply Drivers of Bitcoin Price
- Internet Use and Child Malnutrition: Evidence from Rural Areas in China
- Public Services, Urban Innovation and Green Total Factor Productivity
- Convergence and Paths of Economic Growth
- Digital Financial Inclusion and Multidimensional Poverty Alleviation: Empowering Young Migrant Workers in China
- The Impact of Digital Economy on Urban-Rural Integrated Development: Taking the 19 City Clusters in China as Examples
- Digital Economy and Urban Green Development: Regional Heterogeneity and Empirical Evidence from Chinese Cities
- “Kazakhstan’s Dairy Sector: Greening the Economy Through Innovation and Clean Production”
- How Do Stringent Climate Policies Influence Carbon Intensity and Profitability? Insights from the Chinese Market
- Does ESG Contribute to Pump-and-Dump Schemes of Insider Investors on the Stock Market?
- Special Issue: Shapes of Performance Evaluation – 2nd Edition
- Coupling Tourism Carbon Emission Efficiency and Economic Resilience in China’s Yellow River Basin
Articles in the same Issue
- Review Articles
- Professional Development of ESP Teachers for Digital Transformation: Approaches, Challenges, and Policy Implications
- How Does the Adoption of Generative AI Affect the Speed of Strategic Decision-Making and Innovation Performance in SMEs?
- Research Articles
- Family vs. Non-Family Firms: Linking Future Environmental Expenditures to Firm Value
- The Dynamic Association of Economic Policy Uncertainty, Short-Term Cross-Border Capital Flows and Systemic Financial Risk
- On- and Off-Chain Demand and Supply Drivers of Bitcoin Price
- Internet Use and Child Malnutrition: Evidence from Rural Areas in China
- Public Services, Urban Innovation and Green Total Factor Productivity
- Convergence and Paths of Economic Growth
- Digital Financial Inclusion and Multidimensional Poverty Alleviation: Empowering Young Migrant Workers in China
- The Impact of Digital Economy on Urban-Rural Integrated Development: Taking the 19 City Clusters in China as Examples
- Digital Economy and Urban Green Development: Regional Heterogeneity and Empirical Evidence from Chinese Cities
- “Kazakhstan’s Dairy Sector: Greening the Economy Through Innovation and Clean Production”
- How Do Stringent Climate Policies Influence Carbon Intensity and Profitability? Insights from the Chinese Market
- Does ESG Contribute to Pump-and-Dump Schemes of Insider Investors on the Stock Market?
- Special Issue: Shapes of Performance Evaluation – 2nd Edition
- Coupling Tourism Carbon Emission Efficiency and Economic Resilience in China’s Yellow River Basin
