64 Pages Posted: 16 Apr 2008 Last revised: 12 May 2014
Date Written: November 30, 2009
Entrepreneurs may be legally bound 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 10,004 firms from 38 countries in 1990-2006, we find that stricter inheritance law is associated with lower investment in family firms, but does not affect investment in non-family firms. Moreover, as the model predicts, inheritance law affects investment only in family firms that experience a succession.
Keywords: succession, family firms, inheritance law, growth, investment
JEL Classification: G31, G32, G38
Suggested Citation: Suggested Citation
Ellul, Andrew and Pagano, Marco and Panunzi, Fausto, Inheritance Law and Investment in Family Firms (November 30, 2009). 3rd Annual Conference on Empirical Legal Studies Papers; ECGI - Finance Working Paper No. 222/2008. Available at SSRN: https://ssrn.com/abstract=1092250 or http://dx.doi.org/10.2139/ssrn.1092250