How does family exit affect family business financialization?

•Family exit at the management level promotes the financialization of firms.•Family exit at the level of equity structure inhibits firm financialization.•Family exit increases the level of corporate financing constraints. This paper examines how the family exit of family businesses affects financialization, using family-owned firms in China's stock markets as samples. The study shows that family exit from executive positions to increase the proportion of non-family member executives has a facilitating effect on corporate financialization, and controlling family's reduced shareholding has a dampening effect on corporate financialization; providing equity incentives to executives helps to dampen the facilitating effect of family exit at the managerial level on corporate financialization compared to compensation incentives; and family exit reduces the degree of corporate financialization by increasing the level of corporate financing constraints.