Entrepreneurs may be legally bound to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,004 firms from 38 countries in 1990-2006, we find that stricter inheritance law is associated with lower investment in family firms, but does not affect investment in non-family firms. Moreover, as the model predicts, inheritance law affects investment only in family firms that experience a succession.
Inheritance Law and Investment in Family Firms / Ellul, Andrew; Pagano, Marco; F., Panunzi. - In: THE AMERICAN ECONOMIC REVIEW. - ISSN 0002-8282. - STAMPA. - 100:5(2010), pp. 2414-2450. [10.1257/aer.100.5.2414]
Inheritance Law and Investment in Family Firms
ELLUL, Andrew;PAGANO, MARCO;
2010
Abstract
Entrepreneurs may be legally bound to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,004 firms from 38 countries in 1990-2006, we find that stricter inheritance law is associated with lower investment in family firms, but does not affect investment in non-family firms. Moreover, as the model predicts, inheritance law affects investment only in family firms that experience a succession.| File | Dimensione | Formato | |
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