Hong Kong University of Science and Technology

School of Business and Management

FINA4929N Family Business

Fall 2020

1. GENERAL INFORMATION

Instructor: Winnie Qian PENG

Adjunct Associate Professor in Department of Finance;
Director of Tanoto Center for Asian Family Business and Entrepreneurship
Studies;
Director of Thompson Center For Business Case Studies
Email: pengq@ust.hk
Phone: 2358-8259
Office & office hours: LSK Room 5004 –by appointment only

Teaching Assistant: Carol Lam, Department of Finance

Email: swlamust@ust.hk
Phone:
Office & office hours:

Class Dates and Venue: Wed & Fri 2020/9/9-2020/12/4

Course Prerequisite(s): FINA2203 or 2303
Course Exclusion(s): N/A
Course Add/drop 19-Sep-2020
deadline: (Any late add/drop will not be considered, please contact your program
office)
Canvas course site: https://canvas.ust.hk/courses/

2. COURSE DESCRIPTION

Family businesses are the most pervasive form of business worldwide. In Europe, histories of family
businesses and their influences transcend centuries; in the United States, 35% of listed firms in the
Standard & Poor's 500 are family-owned; here in Hong Kong, nearly 70% of listed firms are family-
owned, while over 60% of GDP in Mainland China is contributed by family businesses, and their speed of
wealth creation surpassed other parts of the world in recent years.

Given its significance in Asia, almost everybody in his/her career will have a certain level of exposure to
family businesses. Still it is ironical that most premier business school courses do not discuss the
challenges of successfully managing such businesses. This course fills that gap in HKUST.

Family businesses are unique in many ways. Their uniqueness arises primarily out of the overlap in roles
of ownership, management and family responsibilities concentrated in a few people. The nature and
intensity of the roles played by family members and non-family executives keep changing, thus adding
to the complexity of managing family controlled businesses. For successful leadership of family
businesses, it is important to understand this dynamics and respond to them constructively. This does
not happen automatically. Among the several areas that require attention, formulation of a clear
financing and ownership strategy, grooming of a sustainable business and having trans-generational
leadership that practices high quality governance are crucial for success. In the absence of action on
these areas break up of family businesses is often considered normal. Only a small percentage of family
businesses survive and grow beyond second and third generations.

This course focuses on two things: one, what are the unique challenges faced by family controlled
business, and why they are so? Two, what are the principles and processes to preserve and perpetuate
them? What kind of financing and ownership strategies, leadership qualities and governance practices
will help in this endeavor? Drawing key concepts and tools of analysis from finance, management and
entrepreneurship literature, this course offers a unique opportunity to apply them in the context of
family business. The course is highly application oriented and will build on the experiences of a number
of families, mostly Chinese.

The course uses lectures and case studies in class. Some guest lectures will be provided by industry
practitioners and leaders. This course will be found of immense value not only by students belonging to
family businesses, but also by those likely to work with them as managers, since they directly interact
with families constantly. This course will be also helpful for those who will provide services to family
businesses in the future, such as private and investment bankers, family office professionals, private
equity professionals, and other service professionals working closely with wealthy families in the region.
The course draws heavily on the faculty’s research experience and active interactions with family
businesses in Asia.

This course is a prerequisite for the course “Family Office” to be offered in the spring term, in which
different roles of family office will be introduced, especially the financial roles for wealthy families and
individuals.

3. COURSE OBJECTIVES

By the end of the course, students will be able to understand:

● Fundamentals of family business

● Complexities of Family business
● Characteristics of Chinese family business
● Factors that contribute to the longevity of family business
● The role of family governance in family business
● The role of professional management in family business
● Financing options for family business
● How to plan for succession and leadership of next generation
 ● How to value family business for different purposes
● Exist strategy for family business
● How to preserve the family value through family philanthropy
● The role of family office
4. COURSE INTENDED LEARNING OUTCOMES

It is expected that after completion of the course, the students will:

CLO1: Understand the fundamentals of family business including its definition, importance, complexity,
and how it differs from non-family business;
CLO2: Analyze the factors contributing to the longevity of family businesses, and the causes for the
potential early demise, especially for ethnic Chinese family businesses;
CLO3: Understand the financing options of family business, and risk related to getting listed and over-
borrowing;
CLO4: Be able to valuate family business for different purposes, including pruning of ownership,
professionalizing of family business and selling of family business;
CLO5: Prepare for succession planning, including selection criteria of future leaders of family businesses
(family members vs. professional managers; women’s roles);
CLO6: Design suitable wealth planning strategies, structures (e.g., family office, family trust,
philanthropic foundation) and governance systems for wealth creators to preserve family wealth, legacy,
and harmony across generations;
CLO7: Understand the similarities of and differences between Chinese family businesses and those from
other ethnic groups around the world.

5. COURSE TEACHING AND LEARNING ACTIVITIES

Expected Study Load

Course Teaching and Learning Activities contact hours (% of study)

Lecture 25 27.8%
Case discussion 15 16.7%
Homework assignment (five) 15 16.7%
Mid-term exam 2 2.2%
Final project 3 3.3%
Private Study 30 33.3%
Total(approx.) 90 100%

Assessment Methods Brief Description (Optional) Weight (%) Aligned Course

(Homework assignment, Learning
Quiz, Class participation Outcomes
etc) (CLO no in section
4)

Class participation Class attendance, in-class discussion 10.0% ALL

Homework assignments Individual/group work 35.0% ALL
Mid-term exam Individual test 15.0% First half
Final Project Individual project, presentation 40.0% ALL

Total 100%
6. STNDARDS FOR ASSESSMENT

Course Grade Descriptors

A+, A, A- Excellent Performance
B+, B, B- Good Performance
C+, C, C- Satisfactory Performance
D Marginal Pass
F Fail
7. COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE

Week/Session Course Content

Week 1 Introduction of family business: definition, importance, uniqueness and complexities of family
business and challenges for family business

Week 2 Characteristics of Chinese family business: history and characteristics, research sharing on
century-old overseas Chinese family businesses, transformation and upgrading of Mainland Chinese
family businesses

Week 3 Family governance: definition, family council, family constitution, case study on Family
governance in Lee Kum Kee Family

Week 4 Professionalization of family business: family manager vs. non-family manager, the roles of
professionals, guest lecture by former CEO of SaSa cosmetics

Week 5 Financing options for family business (1): introduction, internal financing, debt financing, case
study on Wanda and Neoglory

Week 6 Financing options for family business (2): the advantages and disadvantages of getting listed,
the role of private equity, case study on Li & Fung and Eu Yan Sang

Week 7 Mid-term;
Succession Planning: Management and ownership succession

Week 8 Succession Planning: nurturing young leaders, case study on Yung Kee Restaurant and Crown
Worldwide;
Women’s role in family business: case study on Lee Kum Kee

Week 9 Valuation for family Business (1): Introduction and methods, case study on Pacific Coffee, guest
lecture by former Chairman of Pacific Coffee

Week 10 Valuation for family Business (2): financial and non-financial aspects of the valuation, case
study on OOCL and HKBN

Week 11 Family wealth planning: the psychology of wealthy people, new wealth vs. old wealth, family
trust, case study on Great Eagle family

Week 12 Family office: definition, roles, Asianized family offices, mini cases on family offices around
the world;
Family philanthropy: traditional philanthropy vs. strategic philanthropy, family foundation,
case study on Sun Hing family

Week 13 Final project presentation

8. TEACHING MATERIALS (e.g. journals, textbooks, website addresses etc.)

Case Materials:
Lee Kum Kee: Female Succession in Family Business (produced by HKUST, distributed by HBP)
Sun Hing: Keeping the Family Together through Philanthropy (produced by HKUST, distributed by HBP)
SaSa Cosmetics case study (distributed by HBP)
The Great Eagle case study (produced and distributed by HKUST)
Crown Worldwide case study (produced and distributed by HKUST)

Suggested /supplementary Materials:

Selected reading materials will be posted on CANVAS and/or distributed in class.

9. MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE

a) Complete online Student Feedback Questionnaires (SFQ) Survey during two weeks before the
course end at: Canvas website (https://canvas.ust.hk) or
SFQ Mobile website (http://sfq.ust.hk/mobile/) or
HKUST iLearn app at smartphones / tablets

10. COURSE POLICY (e.g. plagiarism, academic honesty, attendance, etc.)

Course policies will strictly follow HKUST policies. Cheating, dishonesty and plagiarism will not be
tolerated at any time and may result in strict sanctions.

1. Attendance: Please be punctual for class. Late arrival/early departure is disruptive and disrespectful.
2. Participation: Active participation is required, and is an important part of the grade. You are very
welcome to make suggestions, comments and general contributions to the course. This can be done in
person, by raising hand physically or online.

3. Mobile phones and other beeping devices need to be turned off or put on silent mode.
Portable computers, laptops and tablets are allowed so long as they do not lead to
inappropriate behavior and disturbance.

4. Video recording of lectures may be arranged by the School and the Lecturer. Any other recording
(photo, audio or video) is strictly prohibited. Lectures are the copyright property of the Lecturer. Any
recording can only be produced with the express consent of the Lecturer.

5. Exam: There will be no make-up exam. Unexcused absence will result in zero grading for that test.
The exam will be closed-book.

6. Course Materials, Copyright, Questions and contact with instructor: The course materials will be
posted on the University’s CANVAS, please check the website on a regular basis for new postings. The
Lecture notes are the copyright property of the Lecturer and are provided for the sole private use of
the students. They may not be reproduced or disseminated without the express consent of the
Lecturer.