Institutional Development and Value of Business Groups: The Case of China Raphael Amit Wharton School, University of Pennsylvania 2012 Steinberg-Dietrich Hall Philadelphia, PA 19104, USA amit@wharton.upenn.edu Yuan Ding China Europe International Business School (CEIBS) 699, Hongfeng Road 201206 Shanghai, P. R. China dyuan@ceibs.edu Belén Villalonga Harvard Business School Soldiers Field Boston, MA 02163, USA bvillalonga@hbs.edu Hua Zhang China Europe International Business School (CEIBS) 699, Hongfeng Road 201206 Shanghai, P. R. China zhua@ceibs.edu Draft, May 31, 2011 We would like to thank Marshall Meyer, Berk Sensoy, Yulia Veld-Merkoulova, and seminar participants at Babson College, Harvard Business School, the Wharton School, the Economics of Entrepreneurship and Innovation Conference, the European Institute for Advanced Management Studies Workshop on Family Firms Management Research, the Melbourne Finance and Corporate Governance Conference, the Real Colegio Complutense in Cambridge, and the Shanghai Winter Finance Conference. Anderuth Yin provided able research assistance. We acknowledge funding support from CEIBS-Wharton Joint Research Initiative. Raphael Amit is grateful for the financial support of the Robert B. Goergen Chair at the Wharton School, and the Wharton Global Family Alliance. Yuan Ding gratefully acknowledges the generous support of Jiangsu Jinsheng Industry Co., Ltd. Belén Villalonga is grateful for the financial support of the Division of Research at the Harvard Business School. Financial data for our sample firms are obtained from the GTA Data Company. All errors are our own.