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Inheritance Law and Investment in Family Firms

Fausto Panunzi, Andrew Ellul and Marco Pagano

No 50330, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: Entrepreneurs may be constrained by the law 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 10,245 firms from 32 countries over the 1990-2006 interval, we find that stricter inheritance law is associated with lower investment in family firms, while it leaves investment unaffected in non-family firms. Moreover, as predicted by the model, inheritance law affects investment only in family firms that experience a succession.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 61
Date: 2009
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Citations: View citations in EconPapers (2)

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https://ageconsearch.umn.edu/record/50330/files/6-09.pdf (application/pdf)

Related works:
Journal Article: Inheritance Law and Investment in Family Firms (2010) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:50330

DOI: 10.22004/ag.econ.50330

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