Institutional Environment, State Ownership and Family Business Succession: Evidence from China*

Abstract We examine the impact of the lack of institutional environment on the succession of family businesses and explore the moderating role of state ownership in the relationship. The empirical results show that in areas with poor institutional environment, it is more difficult for family business to inherit from generation to generation. State ownership in a family business can be used as an informal system to mitigate the negative impact of an imperfect institutional environment on succession. We also find that when state ownership comes from the local government or participates in corporate governance, its moderating effect is more significant.