Collectivist Cultures and the Emergence of Family Firms

Forthcoming in Journal of Law and Economics

50 Pages Posted: 6 May 2021

See all articles by Joseph P. H. Fan

Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Qiankun Gu

Wuhan University - Economics and Management School

Xin Yu

University of Queensland

Date Written: April 1, 2021

Abstract

Using a sample of 1,103 Chinese private-sector firms that went public during 2004-2016, we find that founders from the country’s regions with stronger collectivist cultures engage more family members as managers, retain more firm ownership within the family, and share the controlling ownership with more family members. These findings are robust to a battery of diagnostic tests to account for alternative institutional factors that may induce the relations. The results are consistent with the hypothesis that because the collectivist culture reduces information asymmetry, shirking problems, and associated monitoring costs among family members, more family ownership and management is expected in firms when entrepreneurs are from collectivist regions. The overall evidence supports the theory of the firm pioneered by Harold Demsetz and his co-authors.

Keywords: Ownership structure, Family firms, Collectivist culture, Individualist culture, Rice culture, China

Suggested Citation

Fan, Po Hung Joseph P. H. and Gu, Qiankun and Yu, Xin, Collectivist Cultures and the Emergence of Family Firms (April 1, 2021). Forthcoming in Journal of Law and Economics, Available at SSRN: https://ssrn.com/abstract=3839978

Po Hung Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
(852) 26097839 (Phone)
(852) 26035114 (Fax)

Qiankun Gu

Wuhan University - Economics and Management School ( email )

Wuhan, Hubei
China

Xin Yu (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
223
Abstract Views
891
rank
174,840
PlumX Metrics