Sources of Ownership and Related Party Transactions in Family Firms — Empirical Evidence Based on Chinese Listed Family Firms

We examine how initial property rights formation influences related-party transaction (RPT) behavior in family businesses. Utilizing a sample of Chinese listed family firms from 2003 to 2023, we trace property rights origins and classify firms as entrepreneurial family businesses or privatized state-owned enterprises. We find that State-reformed family enterprises face suspicion regarding the acquisition of property rights, bear high political costs and are subjected to greater public scrutiny; consequently they exhibit a higher propensity to use RPTs for wealth concealment and protection. This tendency was mitigated by the Property Rights Law and intensified by local government official turnover. Firm size amplified and entrepreneurs’ political capital reduced the behavioral differences between entrepreneurial and state-reformed family firms. The Implementation Guidelines for RPTs of Listed Companies further curtailed RPT behavior among the latter enterprises. This research reveals motivations for RPTs in family firms and highlights the political cost hypothesis in emerging markets and transition economies.