Inheritance Law and Investment in Family Firms

Marco Pagano, Fausto Panunzi and Andrew Ellul

No 6977, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 laws affects investment only in family firms that experience a succession.

Keywords: Family firms; Inheritance law; Investor protection (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-reg
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Inheritance Law and Investment in Family Firms (2010)
Working Paper: Inheritance Law and Investment in Family Firms (2009)
Working Paper: Inheritance Law and Investment in Family Firms (2009)
Working Paper: Inheritance Law and Investment in Family Firms (2009)
Working Paper: Inheritance Law and Investment in Family Firms (2009)
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