Main Article Content
Formal Institution, Informal Institution, Multiple Large Shareholders (MLS), Collusions
Informal institutions such as culture is contingent condition affecting opportunism in large shareholders' relationships (Sauerwald and Peng, 2013). Using the data from 2003 to 2012 of Chinese family firms, our research finds that the collusions of multiple large shareholders (MLS) caused by Chinese family-oriented collectivism culture lead to firm’s investment inefficiency, including overinvestment and underinvestment. Unlike prior literature focusing merely on the agency problems of management or controlling shareholders, this study provides evidence of the agency problems of MLS. From examining the relations and allocations of shareholders ownership, we provide shareholders’ collusions, a new theoretical perspective to explain the investment inefficiency in Chinese family firms.