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Contract Enforcement and Family Control of Business: Evidence from China

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  • Yi, Lu
  • Zhigang, Tao

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

  • Yi, Lu & Zhigang, Tao, 2009. "Contract Enforcement and Family Control of Business: Evidence from China," MPRA Paper 18209, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18209
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    Cited by:

    1. Claudio Petti & Lauretta Rubini & Silvia Podetti, 2017. "Government Support and R&D Investment Effectiveness in Chinese SMEs: A Complex Relationship," Asian Economic Papers, MIT Press, vol. 16(1), pages 201-226, Winter/Sp.
    2. van Hoorn, Andre, 2013. "Trust and Organizational Design: Explaining Cross-National Differences in Work Autonomy," MPRA Paper 80016, University Library of Munich, Germany.
    3. Dong, Zhiqiang & Wei, Xiahai & Zhang, Yongjing, 2016. "The allocation of entrepreneurial efforts in a rent-seeking society: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 353-371.
    4. Lu, Yi & Png, Ivan P.L. & Tao, Zhigang, 2013. "Do institutions not matter in China? Evidence from manufacturing enterprises," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 74-90.
    5. Ng, Travis & Yu, Linhui, 2014. "Which types of institutions hinder productivity among private manufacturing firms in China?," China Economic Review, Elsevier, vol. 31(C), pages 17-31.
    6. repec:bla:etrans:v:25:y:2017:i:3:p:495-525 is not listed on IDEAS
    7. Lixin Colin Xu, 2011. "The Effects of Business Environments on Development: Surveying New Firm-level Evidence," World Bank Research Observer, World Bank Group, vol. 26(2), pages 310-340, August.
    8. Chen, Tao, 2015. "Institutions, board structure, and corporate performance: Evidence from Chinese firms," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 217-237.

    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 - 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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