Non-family shareholder governance and corporate risk-taking: Evidence from Chinese family-controlled businesses

Increasing corporate risk-taking is crucial for family businesses that tend to be averse to the loss of socioemotional wealth. This study expands research on non-family shareholder governance by exploring the role of non-family shareholders in influencing the strategic decisions of family businesses. We find that the ownership structure and board participation associated with non-family shareholder governance can enhance corporate risk-taking by weakening family control and strengthening inheritance intention. Furthermore, family style and institutional efficiency can optimize the impact of the mechanisms of non-family shareholder governance and corporate risk-taking. Non-family ownership and directors appointed by non-family shareholders exert a cross effect. Compared with non-family ownership, non-family shareholders who are free to participate in corporate governance through ownership and the appointment of directors can better help family businesses improve their corporate risk-taking. Compared with foreign shareholders and institutional investors, the heterogeneous checks and balances of state and private shareholders can effectively enhance corporate risk-taking. Corporate risk-taking can strengthen the long-term orientation of family businesses. This positive relationship is more significant when the level of non-family shareholder governance is higher than when it is lower. Our conclusions broaden the understanding of the corporate risk-taking behavior of family businesses from the perspective of non-family shareholder governance. As such, they shed light on how to enhance the long-term orientation of family businesses.