Family Control, Pyramidal Ownership and Investment-Cash Flow Sensitivity: Evidence from an Emerging Economy

Aline Damasceno Pellicani, Aquiles Elie Guimarães Kalatzis and Dante Mendes Aldrighi

Emerging Markets Finance and Trade, 2021, vol. 57, issue 8, 2426-2446

Abstract: We investigate the effect of pyramidal ownership and family control on the investment-cash flow sensitivity of Brazilian firms using financial constraint indexes to 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 has a negative effect on investment decisions. However, the active involvement of the controlling family on the board increases the investment-cash flow of unconstrained firms, possibly aggravating agency problems. Regarding pyramidal ownership, we provide evidence that is consistent with the idea of the internal transfer of funds among firms that possess the arrangement structure.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:57:y:2021:i:8:p:2426-2446

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DOI: 10.1080/1540496X.2019.1648249

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