Using a sample of 612 listed Chinese non-SOEs from 2006 to 2009, we show that the use of collateral is
higher in family-controlled firms. This effect is more pronounced when family firms have a larger controlownership
wedge, family representation in management, and are led by a descendant chairman/CEO. We
further document that having multiple large shareholders, paying higher dividends, having completed
the split-share structure reform and being located in provinces with more competitive credit markets
can mitigate the incentive of controlling families to engage in expropriation and reduce the level of collateral
required. Overall, we contend that in China, the risk of expropriation associated with family control
leads to an increased credit risk and, in turn, higher collateral being required by banks.