Are Investor Protection and Ownership Concentration Substitutes in Chinese Family Firms?

By using a unique and detailed data set on China's family firms, we investigate the effect of investor protection on the choice of ownership concentration of family businesses. Our study extends the literature's focus on intercountry analysis by presenting a new perspective based on investor protection variations among regions within a country. We find that family ownership concentration in general complements investor protection in China. They can, however, be substitutes for one another when managerial power remains in t he family. Our results are robust to various specifications of variables and model estimations.