Date of Graduation

Spring 5-1-2012

Document Type


Degree Name

Master of Arts (MA)



First Advisor

Bruce Wydick


Drawing on firm-level data from the district of Coimbatore in Tamil Nadu, India, this study explores the role of family ties as a means to counteract potential moral hazard concerns. It is shown that firms will be more likely to employ family relations when faced with a higher hidden context for moral hazard. Specifically, the analysis finds that the presence of family members within the firm is higher when the firm provides general training and that firms that are more likely to do external business with family relations when it is believed that the legal system is not effective. Additionally, the results suggest that there may be other factors that are equally or more influential in predicting a reliance on family relations, such as prior experience and profitability.