An Inquiry into the Causes and Preventive Measures of 
Internal Control Deficiencies in Family Businesses under 
Intergenerational Succession: A Case Study of Jiangnan 
Mould & Plastic Technology Co., Ltd

Longjun Xu; Rui Ding*

doi:10.70711/frim.v3i11.7664

An Inquiry into the Causes and Preventive Measures of Internal Control Deficiencies in Family Businesses under Intergenerational Succession: A Case Study of Jiangnan Mould & Plastic Technology Co., Ltd

Longjun Xu, Rui Ding*

Abstract

Intergenerational succession in family businesses is a critical issue that determines their sustainable development. In this paper, we
use Jiangnan Mould & Plastic Technology Co., Ltd. as a case study to analyze the underlying mechanisms of internal control failure in Chinese listed family firms after the completion of succession. We find that deficiencies such as non-operating fund occupation, abnormally high
executive compensation, and severe misstatements in annual reports stem from three systemic causes: (1) a "dominant shareholder" governance structure characterized by highly concentrated ownership; (2) the failure of supervision due to the long tenure of key executives; and (3)
the second-generation managers erroneous mentality of treating the public company as "private property." These intertwined factors lead to
the collapse of the internal control system. Based on these findings, we propose targeted preventive measures, including strengthening shareholder agreements, enhancing board independence, and reinforcing external oversight, to provide a reference for the healthy succession of
family businesses.

Keywords

Family Business; Intergenerational Succession; Internal Control; Corporate Governance

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DOI: http://dx.doi.org/10.70711/frim.v3i11.7664

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