Abstract

http://ssrn.com/abstract=1308048
 
 

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Inheritance Law and Investment in Family Firms


Andrew Ellul


Indiana University - Kelley School of Business - Department of Finance

Marco Pagano


University of Naples Federico II - Department of Economics and Statistics; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Fausto Panunzi


Bocconi University - Department of Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

September 2008

CEPR Discussion Paper No. DP6977

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.

Number of Pages in PDF File: 62

Keywords: Family firms, Inheritance law, Investor protection

JEL Classification: G32

working papers series


Date posted: December 2, 2008  

Suggested Citation

Ellul, Andrew and Pagano, Marco and Panunzi, Fausto, Inheritance Law and Investment in Family Firms (September 2008). CEPR Discussion Paper No. DP6977. Available at SSRN: http://ssrn.com/abstract=1308048

Contact Information

Andrew Ellul
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States

Marco Pagano (Contact Author)
University of Naples Federico II - Department of Economics and Statistics ( email )
Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)
Einaudi Institute for Economics and Finance (EIEF)
Via Sallustiana, 62
Rome, 00187
Italy
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http:/www.ecgi.org
Fausto Panunzi
Bocconi University - Department of Economics ( email )
Via Roentgen 1
20136 Milan
Italy
+39 02 5836 5327 (Phone)
+39 02 5836 5343 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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