Family Managers and Investment Decisions

González, Xulia, Saul Lach, Daniel Miles and Pazó Martínez, María Consuelo

No 21383, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper examines how managerial type shapes firms’ investment decisions, focusing on the distinction between owner (family)-managed firms and professionally-managed firms. We estimate a flexible investment policy function which depends on productivity, capital, labor and on other firm-level state variables, and is allowed to vary systematically with managerial type. Since firm-level productivity is not directly observed, we estimate it in a first step, addressing both the endogeneity of input choices and the lack of information on physical quantities. Our analysis draws on a rich panel of Spanish manufacturing firms from 1993 to 2016 that identifies whether firm owners, or their relatives, hold managerial positions. We find that, after controlling for state variables, family-managed firms invest more on average than professionally-managed firms. Managerial type also matters for how investment responds to changes in its determinants. In particular, family-managed firms exhibit stronger investment responses to changes in productivity and capital and display more procyclical investment behavior.

Keywords: Family firms; Productivity (search for similar items in EconPapers)
JEL-codes: D22 D24 D25 L11 L60 (search for similar items in EconPapers)
Date: 2026-04
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