Performance and Behavior of Family Firms: Evidence From the French Stock Market

David Thesmar and David Sraer

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Abstract: This paper empirically documents the performance and behavior of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, whereas the remaining two thirds are family firms. We find that, in the cross-section, family firms largely outperform widely held corporations. This result holds for founder-controlled firms, professionally managed family firms, but more surprisingly also for firms run by descendants of the founder. We offer explanations for the good performance of family firms. First, we present evidence of a more efficient use of labor in heir-managed firms. These firms pay lower wages, even allowing for skill and age structure. We also find that descendants smooth out industry shocks and manage to honor implicit labor contracts. Second, we present evidence consistent with outside CEOs in family firms making a more parsimonious use of capital. They employ more unskilled, cheap labor, use less capital, pay lower interest rates on debt and initiate more profitable acquisitions.

Keywords: CLOSE corporations; CORPORATIONS -- Finance; FAMILY corporations; FAMILY-owned business enterprises; STOCK exchanges; ECONOMICS -- Research (search for similar items in EconPapers)
Date: 2007-06
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Citations: View citations in EconPapers (259)

Published in Journal of the European Economic Association, 2007, 5 (4), pp.709-751. ⟨10.1162/JEEA.2007.5.4.709⟩

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Related works:
Journal Article: Performance and Behavior of Family Firms: Evidence from the French Stock Market (2007)
Working Paper: Performance and Behaviour of Family Firms: Evidence from the French Stock Market (2004)
Working Paper: Performance and Behavior of Family Firms: Evidence from the French Stock Market (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00170635

DOI: 10.1162/JEEA.2007.5.4.709

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