Culture and the Historical Persistence of Minority Shareholder Expropriation

Abstract

Can historical culture explain persistent regional differences in economic expropriation? We document that the levels of tunneling and opacity of Chinese public firms are negatively associated with regional Confucian culture, captured by data from the Qing Dynasty of Imperial China (1644--1912 AD). The results are robust to controlling for local economic development, enforcement of property rights, and geography and to using two instruments constructed from data in the Ming Dynasty (1368--1644 AD). The findings suggest that culture represents a fundamental force that constrains economic expropriation, which has important implications for economic development (Acemoglu, Johnson, and Robinson, 2001; Rajan and Zingales, 2003).