Clan culture against the shock of the COVID-19 pandemic: Evidence from Chinese listed firms

Abstract

This paper examines whether clan culture, as an informal institution, enhanced the resilience of Chinese listed firms to the COVID-19 shock. It further investigates whether this effect operated through financing and labor channels and whether it became weaker in regions with more developed formal institutions. To address these questions, we construct a firm-level measure of clan culture by combining genealogy records from the General Catalogue of Chinese Genealogy with senior executives’ clan-related characteristics. This measure is merged with financial data for Chinese A-share listed firms in 2020–2021, city-level macroeconomic data, and COVID-19 data from Johns Hopkins University. Using a two-way fixed-effects model, together with a series of robustness checks, mechanism tests, and heterogeneity analyses, we estimate the moderating effect of clan culture on firm performance during the pandemic. The results show that COVID-19 had a significant negative effect on firm performance, while stronger clan culture significantly weakened this adverse effect. Mechanism analysis indicates that clan culture helped firms cope with the shock by easing financing constraints and alleviating labor shortages. We further find that the buffering effect of clan culture is stronger in regions with less-developed formal institutions, suggesting that clan culture partly substitutes for formal institutional arrangements such as the legal system. These findings highlight the role of informal institutions in shaping firm resilience to major external shocks and suggest that policies aimed at strengthening resilience should take into account both formal institutional development and the supportive role of informal social structures.