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Contract enforcement and family control of business: Evidence from China

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  • Lu, Yi
  • Tao, Zhigang

Abstract

Family control of business is prevalent in developing economies, and one of the leading theories suggests that it is a response to weak contract enforcement in such economies. In this paper, we investigate the impacts of contract enforcement on the degree of family control of business using a sample of China's private enterprises. It is found that weaker contract enforcement is associated with the higher degree of family control of business. Our results are robust to the control for omitted variables and reserve causality issues, to the adjustment for the sample attrition bias, to the use of a sub-sample, and to the inclusion of other explanations for the family control of business.

Suggested Citation

  • Lu, Yi & Tao, Zhigang, 2009. "Contract enforcement and family control of business: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 597-609, December.
    • Handle: RePEc:eee:jcecon:v:37:y:2009:i:4:p:597-609
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    More about this item

    Keywords

    Family control of business Contract enforcement China' s private enterprises;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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