Title: Contract Enforcement and Family Control of Business: Evidence from China
Reference Number: 1191
Publication Date: June 2009
JEL Classifcation: P37, L22, D21, K12

Yi Lu
The University of Hong Kong

Zhigang Tao
The University of Hong Kong

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.

Published in Journal of Comparative Economics 37:4, December 2009, pp. 597-609

Key words: Family Control of Business, Contract Enforcement, China's Private Enterprises

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Last modified: 09/20/2010