20 October 2006

CUHK Examines How Asian Family Businesses
Can Continue Their Success Across Generations

We are all familiar with the old saying: “Wealth cannot be passed on to the third generation”. Could this traditional Chinese wisdom be applied in today's business world? In his ongoing research on “Succession in Asian Family Business”, Professor Joseph Fan, School of Accountancy of The Chinese University of Hong Kong (CUHK) conducted a detailed study on the present scenario, the key factors in determining success or failure of succession as well as governance structure and corporate policies that affect succession in Asian family businesses.

In a press conference prior to a “Forum and Workshop for Family and Closely-held Businesses” organized by the Center for Entrepreneurship of CUHK today, Prof. Fan illustrated his key research findings, “Substantial decline in financial performance is recorded in the succession process, regardless of whether it is succeeded by heir or outside professional. Hong Kong family owned companies have recorded an average of 80% decline in stock return performance net of overall market performance, over an 8 year period prior to succession completion, which is the highest compare to 40% in Singapore and Taiwan.”

The research studies financial performance of more than 500 publicly listed Asian family businesses in Hong Kong, Japan, Taiwan and Singapore, which have experienced succession process over the period from 1990 to 2005. Key factors for the success of the 1st generation entrepreneurs and various succession challenges are identified to see how these have influenced business performance.

Prof. Chua Bee-leng, Director of the Center for Entrepreneurship, CUHK said, “The research and the Forum cum Workshop for Family and Closely-Held Businesses will launch a series of events and programs on family businesses. We aim to facilitate the understanding of family businesses and other stakeholders on the nature of this important group and how they could better sustain their success across generations. We will accomplish this through our research and community programmes. We are very pleased to have Ms Carmen Bianchi, the founder of the Entrepreneurial Management Center Business Forum for closely held and family businesses at San Diego State University to be the Lead Facilitator of the Forum. Carmen is renowned for her expertise in this field. I am sure she will bring much valued insight to our participants.”

The Center's future plan includes the formation of a “Family and Closely-Held Business Club” that will offer its members, seminars, forums and roundtable meetings to address important issues which include corporate governance, merger and acquisition, and grooming heirs for succession.

In welcoming guests and participants in the Forum, Prof. T S Lee, Dean of Faculty of Business Administration, CUHK said, “Family businesses are prevalent over the world, Hong Kong is no exception. Their uniqueness and contribution are so important that their success is interwoven with the stability and economic development of the city. We are grateful to have the support from Ernst & Young as the event sponsor and Hong Kong Economic Times as our media partner, which has help make this meaningful event happen. My heartfelt thank you also goes to Prof. Gail Naughton and Ms Carmen Bianchi of San Diego State University, the co-organizer of the event who will share with us their invaluable experience in family business studies.”

Professor Joseph Fan, School of Accountancy of The Chinese University of Hong Kong