Marketisation, Information Transparency and the Cost of Equity for Family Firms

From the agency theory perspective, this study investigated the effect of information transparency on the relation between family control and the cost of equity for family firms. Additionally, it considered whether marketisation could moderate the effect of information transparency on the relation between family control and the cost of equity for family firms, based on 573 family firms in China. The results show that the cost of equity is positively related to family control. As information transparency increases, the effect of family control on the cost of equity weakens. Moreover, the negative effect of information transparency on the cost of equity weakens when the control-ownership wedge is high. The three-way interaction among marketisation, family control and information transparency has a negative effect on the cost of equity. This means that the negative effect of information transparency on the relation between family control and the cost of equity weakens as marketisation increases.