Abstract
In a transition economy, how does business group affiliation make
a difference in firm performance? Under the broad label of institutional
voids, what specific voids can business groups fill? This paper addresses
these questions by drawing on insights from property rights theory
and an institutional perspective. We argue that ownership voids,
as a subset of institutional voids, occur due to the lack of unambiguously
specified ownership of state assets in transition economies, and
that business groups emerge to serve as the direct owners of state-owned
enterprises to replace such voids. Based on a sample of 1,119 publicly-listed
Chinese companies, we find that the interaction of business group
affiliation and state ownership has a significant and positive effect
on firm performance. Our findings point to business group's substitution
role in filling ownership voids in China's transition economy. ©
Springer Science+Business Media, LLC 2006.
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