Sensitivity to Shocks and Implicit Employment Protection in Family Firms

Carl Magnus Bjuggren

No 1028, Working Paper Series from Research Institute of Industrial Economics

Abstract: In this study I present empirical evidence that employment in family firms is less sensitive to performance and product market fluctuations, both at the industry and at the firm level. This supports the idea that family firms are able to offer their employees implicit employment protection. Family firms are believed to have longer time horizons, and are as owners more easily identified with their company and its actions. These are features that could make family firms more cautious in terms of adjusting their employment. I confirm previous findings that family firms are less sensitive to sales fluctuations at the industry level and I show that this also holds for fluctuations in value added. I extend the analysis to show that family firms are less sensitive to unanticipated industry shocks by filtering out the trend component. When investigating idiosyncratic shocks to the firm, I find that family firms are less anxious to translate temporary shocks in performance into changes in employment. By using full population data from tax registers, I am able to identify all family firms, both listed and non-listed. This has previously not been feasible.

Keywords: Family Firms; Risk Sharing; Employment Protection; Shocks (search for similar items in EconPapers)
JEL-codes: D22 G32 J21 J23 L25 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-06-10
New Economics Papers: this item is included in nep-bec, nep-eur, nep-lab, nep-lma and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Sensitivity to shocks and implicit employment protection in family firms (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1028

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