Family control, pyramidal ownership and investment-cash flow sensitivity: evidence from an emerging economy

Aquiles Kalatzis and Dante Mendes Aldrighi Aline Pellicani ()

No 2019_12, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We investigate the effect of pyramidal ownership and family control in investment-cash flow sensitivity of Brazilian firms using financial constraint indexes to a priori classify firms. For constrained firms, we find that family control does not directly influence the investment-cash flow sensitivity, while for unconstrained firms, Family control shows a negative effect in investment decisions. However, the active involvement of the controlling family in the board increases investment-cash flow of unconstrained firms, possibly aggravating agency problems. Regarding the pyramidal ownership, we provide evidences consistent with the idea of internal transfer of funds among firms belonged to the arrangement structure.

Keywords: pyramid; family control; investment-cash flow sensitivity; financial constraint. (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2019-04-01
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-sbm
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