Capital flight for family? Exploring the moderating effects of social connections on capital outflow of family business

Capital flight amounts to a substantial proportion of outward capital flow in emerging markets. This study, using a large sample of 2711 Chinese private firms, examines the relationship between family involvement and capital flight of family businesses. The results show that family involvement is positively associated with capital flight. And political connection weakens the positive effect of family involvement on capital flight. Further, our study investigates the moderating effects of political connection and local connection and their context-dependence on business environment. Generally, political connection weakens the positive effect of family involvement on capital flight. And such moderating effect of political connection is significantly negative in high-quality business environments and insignificant in low-quality business environments. More interestingly, moderating effect of local connection that is significantly negative in high-quality business environments turns into significantly positive in low-quality business environments. The effect of family involvement on OFDI and similar moderating effects of political connection and local connection are examined as comparisons. There are divergences of such effects in the case of OFDI and capital flight.