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September 29, 2009

Economic Development and Transition Seminar (EDTS) welcomes Albert Park

Economic Development and Transition Seminar (EDTS) welcomes

Albert Park
Department of Economics, Oxford University

"Family Ties and Organizational Design: Evidence from Chinese Private Firms"
Thursday, October 1, 4:00-5:30 p.m.
3240 Weill Hall

Abstract: Family firms comprise a large share of industrial activity in both developing and developed countries, but little is known about how they operate. Using a unique dataset of Chinese private firms, in this paper we investigate how family ties with firm heads affect managerial compensation and job assignment. We find that family managers earn higher salaries and received more bonuses, hold higher positions, and are given more decision rights and more 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 risk attitudes are unlikely to drive our key results, and discuss implications for economic performance.

Posted by zzhu at September 29, 2009 08:59 AM