Family Ties and Organizational Design: Evidence from Chinese Private Firms

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

No 7855, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 non-family 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. We show that alternative explanations, such as taste-based favoritism, succession concerns, and unobserved ability or risk attitudes, are unlikely to drive our results.

Keywords: Authority; China; Family firm; Incentives (search for similar items in EconPapers)
JEL-codes: D64 D86 L23 M52 (search for similar items in EconPapers)
Date: 2010-06
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Citations: View citations in EconPapers (5)

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Journal Article: Family Ties and Organizational Design: Evidence from Chinese Private Firms (2013)
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