Performance and Behaviour of Family Firms: Evidence from the French Stock Market

David Thesmar and David Sraer

No 4520, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We look at the corporate performance of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, another third are founder controlled and the remaining third are heir-controlled family firms. We find that, in cross section, family firms largely outperform widely held corporations. This result holds for founder-controlled firms, but more surprisingly also for heir-managed firms. To explain this, we provide evidence consistent with the fact that, because of their different time horizons, heir-managed corporations have a comparative advantage when enforcing implicit insurance contracts with their labour force. More specifically, we find that: (1) employment in heir-managed firms is less sensitive to industry shocks; and (2) heirs pay lower wages. Finally, we discuss issues related to the endogeneity of performance/family regressions looking both at delisting and transitions from family to non-family status. We conclude that these issues may lead us to overestimate the performance of heirs compared to professionally-managed firms, but to underestimate the performance of heirs when compared to widely held firms.

Keywords: Family firms; Management style; Corporate performance (search for similar items in EconPapers)
JEL-codes: D21 G32 L21 (search for similar items in EconPapers)
Date: 2004-08
New Economics Papers: this item is included in nep-fin and nep-fmk
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Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Performance and Behavior of Family Firms: Evidence From the French Stock Market (2007)
Working Paper: Performance and Behavior of Family Firms: Evidence from the French Stock Market (2004)
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