Clan culture and risk-taking of Chinese enterprises

Liangxiong Huang, Minghui Ma and Xianbin Wang

China Economic Review, 2022, vol. 72, issue C

Abstract: This paper addresses the impact of China's historical clan culture on corporate behavior. Specifically, it looks at how clan culture decreases the risk-taking of Chinese enterprises. Using a unique dataset, which combines the pedigree density and distribution of publicly listed Chinese enterprises in city-regions, we document that a 1% increase in regional pedigree density dramatically decreases the risk-taking of locally listed enterprises by 2.66%. Furthermore, this paper verifies that in places with a strong clan culture, senior executives (presidents and CEOs) make their enterprises more conservative, taking on the responsibility of protecting the interests and maintaining stability of the clan, and the reputation of them in the clan. Such enterprises have relatively stable business networks and are unwilling to carry out high-risk innovations and cross-city M&As. In addition, their senior executives (presidents and CEOs) are more stable, with longer tenure and a lower frequency of replacement. Finally, the paper notes that improvements in formal institutions could mitigate the negative relationship between clan culture and corporate risk-taking.

Keywords: Clan culture; Risk-taking; Formal institution; Substitution effect (search for similar items in EconPapers)
JEL-codes: A14 G38 H32 L25 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:72:y:2022:i:c:s1043951x22000219

DOI: 10.1016/j.chieco.2022.101763

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