Working Paper: CEPR ID: DP17774
Authors: Saul Estrin; Jan Hanousek; Anastasiya Shamshur
Abstract: Using detailed ownership and financial information from a large sample of private firms from 24 European countries over the period from 2001 to 2018, we examine the relationship between the category of owner and firm investment decisions. Though the literature has been quite critical of the performance of family-owned firms, we find them to exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms are found to invest significantly less in intangible assets compared to other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner type transitions from family owners to corporate and institutional owners.
Keywords: private firms; Europe
JEL Codes: G31; G32; D22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family ownership (J54) | increased investment levels (E22) |
| family ownership (J54) | higher gross investment rates (E22) |
| family ownership (J54) | sensitivity to investment opportunities (G11) |
| family ownership (J54) | sensitivity to profitability (D22) |
| family ownership (J54) | sensitivity to cash flow (E41) |
| state ownership (H13) | higher sensitivity to profitability (D22) |
| state ownership (H13) | higher sensitivity to cash flows (G32) |
| family ownership (J54) | lower investment in intangible assets (G31) |