Family control and investment–cash flow sensitivity: Empirical evidence from the Euro zone

Julio Pindado, Ignacio Requejo and Chabela de la Torre

Journal of Corporate Finance, 2011, vol. 17, issue 5, 1389-1409

Abstract: This paper considers the ownership structure of family firms to determine whether family control alleviates or exacerbates investment–cash flow sensitivity in the Euro zone. We find that family-controlled corporations have lower investment–cash flow sensitivities. Further, our results show that this reduced sensitivity is mainly attributable to family firms with no deviations between cash flow and voting rights and to family firms in which family members hold managerial positions. We also find that second largest shareholders affect family firms' sensitivity and are associated with either monitoring (non-family second blockholders) or collusion (family second blockholders). Overall, family control seems to mitigate investment inefficiencies that derive from capital market imperfections.

Keywords: Family firms; Investment–cash flow sensitivity; Second blockholders; Euro zone (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:17:y:2011:i:5:p:1389-1409

DOI: 10.1016/j.jcorpfin.2011.07.003

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