The Role of Institutional Development in the Prevalence and Value of Family Firms

59 Pages Posted: 17 Nov 2009 Last revised: 21 Dec 2011

See all articles by Raphael ('Raffi") H. Amit

Raphael ('Raffi") H. Amit

The Wharton School UPENN

Yuan Ding

China Europe International Business School (CEIBS)

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Zhang Hua

China Europe International Business School (CEIBS)

Date Written: January 26, 2010

Abstract

We investigate the role played by institutional development in the prevalence and value of family firms, while controlling for the potential effect of cultural norms. China provides a good research lab since it combines great heterogeneity in institutional development across the Chinese provinces with homogeneity in cultural norms, law, and regulation. By decomposing family firms into their ownership, control, and management elements, we are able to test the specific predictions of the investor protection and internal markets explanations. Using hand-collected data from publicly listed Chinese firms, we find that, when institutional efficiency is low, family ownership and management increase value, while family control in excess of ownership reduces value. When institutional efficiency is high, none of these effects are significant. We conclude that institutional development plays an important role in the prevalence and value of family firms.

Keywords: Family firms, Ownership, Control, Management, Value, Institutional development, China

JEL Classification: G3, G32

Suggested Citation

Amit, Raphael H. and Ding, Yuan and Villalonga, Belen and Hua, Zhang, The Role of Institutional Development in the Prevalence and Value of Family Firms (January 26, 2010). Finance and Corporate Governance Conference 2010 Paper, Harvard Business School Finance Working Paper No. 1507823, Available at SSRN: https://ssrn.com/abstract=1507823 or http://dx.doi.org/10.2139/ssrn.1507823

Raphael H. Amit

The Wharton School UPENN ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6370
United States
215 898 7731 (Phone)

Yuan Ding

China Europe International Business School (CEIBS) ( email )

699, Hongfeng Road
Shanghai 201206, Shanghai 201206
China

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Zhang Hua

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
360
Abstract Views
2,561
rank
91,617
PlumX Metrics