| Author: | Lau, Chung Hung |
| Title: | Does the family trust ownership-controlled company structure of Hong Kong listed firms improve and benefit from accounting and market performance? |
| Advisors: | Cheng, C.S. Agnes (AF) Zheng, Lingyi (AF) |
| Degree: | D.B.A. |
| Year: | 2021 |
| Subject: | Family-owned business enterprises -- China -- Hong Kong Family trusts Corporations -- Valuation -- China -- Hong Kong Hong Kong Polytechnic University -- Dissertations |
| Department: | Faculty of Business |
| Pages: | viii, 68 pages : color illustrations |
| Language: | English |
| Abstract: | A family trust ownership-controlled company (FTOC) provides a means of family control and management that facilitates value. It is a corporate control framework comprising a discretionary trust integrated with a family relationship element that improves accounting performance. The FTOC's trust format facilitates the family's controlling ownership concentration of the business, thereby encouraging the beneficiary and trustee to participate in the management of the company and creating value. Therefore, an FTOC managed by a beneficiary and a trustee mitigates agents costs and performs better, especially while managerial trustee is also a beneficiary, combined effects (ROA and net worth growth) on performance. Subsequently, having a managerial beneficiary moderate agency costs for the trustee, while a managerial trustee moderate agency costs for the manager. Furthermore, the presence of a next-generation managerial beneficiary and trustee further boosts the net worth and performance of the FTOC, particularly while next-generation managerial trustee is also a beneficiary, compounded effects (net worth growths) on performance. Despite the fact that FTOC is positively associated with accounting performance; this benefit does not transfer to financial market valuation, causing hindrance in financing projects from the external equity fund market as investors are unlikely to pay an equity price that is higher than its valuation. Even though this setback, FTOC has the option to self-finance using internal resources gained through net worth growth. Furthermore, FTOC and family trust beneficiaries (FTBs), aware that their company is performing well, may be encouraged to purchase shares from the market at a low market valuation price. In practice, the founder of an FTOC is in an ideal position to understand the characteristics of the FTOC's sustainability such as increased survivorship and the advantages of the beneficiary and trustee's participation in management. Nevertheless, the founder must also be cautious in preparing the trust deed and letter of wishes to avoid endogeneity issues that the trustee not complying with the founder's best interests and wishes. |
| Rights: | All rights reserved |
| Access: | restricted access |
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