Family Ties and Organizational Design: Evidence from Chinese Private Firms

Hongbin Cai (), Hongbin Li, Albert Park and Li-An Zhou
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Hongbin Li: Tsinghua University

The Review of Economics and Statistics, 2013, vol. 95, issue 3, 850-867

Abstract: Analyzing data from a unique survey of managers of Chinese private firms, we investigate how family ties with firm heads affect managerial compensation and job assignment. We find that family managers earn higher salaries and receive more bonuses, hold higher positions, and are given more decision rights and job responsibilities than nonfamily managers in the same firm. However, family managers face weaker incentives than professional managers, as seen in the lower sensitivity of their bonuses to firm performance. Our findings are consistent with the predictions of a principal-agent model that incorporates family trust and endogenous job assignment decisions. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: family firm; incentives; authority; job assignments; China (search for similar items in EconPapers)
JEL-codes: D64 D86 L23 M52 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (26)

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Working Paper: Family Ties and Organizational Design: Evidence from Chinese Private Firms (2010)
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