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Inheritance Law and Investment in Family Firms

Andrew Ellul (), Marco Pagano and Fausto PAnunzi ()
Additional contact information
Andrew Ellul: Kelley School of Business, Indiana University
Fausto PAnunzi: Bocconi University, IGIER and CEPR

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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: succession; family firms; inheritance law; growth; investment (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2008-09-21, Revised 2009-11-30
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in the American Economic Review, 2010, 100(5), pp. 2414-50.

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http://www.csef.it/WP/wp204.pdf (application/pdf)

Related works:
Journal Article: Inheritance Law and Investment in Family Firms (2010) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2009) Downloads
Working Paper: Inheritance Law and Investment in Family Firms (2008) Downloads
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