Working Paper: CEPR ID: DP17822
Authors: Gianpaolo Parise
Abstract: I propose a novel measure to identify family firms based on the number of family links between high-ranking co-workers. Leveraging this measure, I reexamine previous findings in the literature and derive five novel facts: (1) Measures of stock ownership misclassify firms with a large family presence. (2) Family-run firms outperform non-family firms. (3) Differences in valuations between family-run and non-family-run firms are amplified by selection. (4) Family-run firms are more cost-effective. (5) Family managers behave myopically. I conclude that failing to consider family links can lead to highly misleading results in the study of family firms.
Keywords: family firms; firm performance; stock ownership
JEL Codes: G32; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family presence (J12) | misclassification of firms (L20) |
| family-run firms (J54) | performance metrics (C52) |
| lower operating costs (L99) | superior performance (D29) |
| family managers (J12) | underinvestment (G31) |