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Collectivist Cultures and the Emergence of Family Firms

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  • Joseph P. H. Fan
  • Qiankun Gu
  • Xin Yu

Abstract

Using a sample of 1,103 Chinese private-sector firms that went public during 2004–16, we find that founders of firms from regions with stronger collectivist cultures engage more family members as managers, retain more ownership in 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 relationships. 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 are expected in firms when founders are from collectivist regions. The overall evidence supports the theory of the firm pioneered by Harold Demsetz and his coauthors.

Suggested Citation

  • Joseph P. H. Fan & Qiankun Gu & Xin Yu, 2022. "Collectivist Cultures and the Emergence of Family Firms," Journal of Law and Economics, University of Chicago Press, vol. 65(S1), pages 293-325.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/718853
    DOI: 10.1086/718853
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    Citations

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    Cited by:

    1. Cheng, Chen & Li, Wanrong & Liu, Guanchun & Liu, Yuanyuan, 2023. "Origin matters: Institutional imprinting and family firm innovation in China," Emerging Markets Review, Elsevier, vol. 55(C).
    2. Chenchen Fan & Mingming Jiang & Bo Zhang, 2024. "Beyond cultural norms: how does historical rice farming affect modern firms' family control?," Economica, London School of Economics and Political Science, vol. 91(363), pages 770-808, July.
    3. Zhou, Xi & Ying, Sammy Xiaoyan & You, Jiaxing & Wu, Huiying, 2024. "Like parent, like child: MNCs’ CSR and their foreign subsidiaries’ environmental footprint," Journal of Business Research, Elsevier, vol. 172(C).
    4. Hou, Fei & Shen, Huayu & Wang, Ping & Xiong, Hao, 2023. "Signing auditors' cultural background and debt financing costs," International Review of Financial Analysis, Elsevier, vol. 87(C).
    5. Ge, Suqin & He, Quqiong & Sarangi, Sudipta, 2024. "Reaping what you sow: Historical rice farming and contemporary cooperative behavior in China," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 581-613.
    6. Dunia G Marino Zuleta & Niu Xiongying & Muhammad Qasim, 2024. "Unlocking Global Success: The Role of Cultural Intelligence and International Experience in Enhancing Expatriates’ Adjustment and Well-Being," International Journal of Science and Business, IJSAB International, vol. 40(1), pages 124-139.
    7. Liu, Haiming & Liang, Quanxi & Ling, Leng, 2022. "Underrepresentation of female CEOs in China: The role of culture, market forces, and foreign experience of directors," Research in International Business and Finance, Elsevier, vol. 63(C).
    8. Cao, Shijiao & Liang, Chao, 2024. "Analyst collaboration networks and earnings forecast performance," International Review of Financial Analysis, Elsevier, vol. 93(C).
    9. Zeng, Sipeng & Yu, Frank, 2024. "Does farming culture shape household financial decisions?," Journal of Corporate Finance, Elsevier, vol. 84(C).

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