Inheritance Law and Investment in Family Firms

Fausto Panunzi, Andrew Ellul and Marco Pagano
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Fausto Panunzi: Università Bocconi
Andrew Ellul: Indiana University

No 2009.6, Working Papers from Fondazione Eni Enrico Mattei

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: Succession; Family Firms; Inheritance Law; Growth; Investment (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cfn and nep-reg
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Citations: View citations in EconPapers (2)

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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 (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2009.6

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