Does Family Control Matter? International Evidence from the 2008-2009 Financial Crisis

Abstract

We study whether and how family control affects valuation and corporate decisions during the 2008-2009 financial crisis using a sample of more than 8,500 firms from 35 countries. We find that family-controlled firms underperform significantly, they cut investment more relative to other firms, and these investment cuts are associated with greater underperformance. Further, we find that within family groups liquidity shocks are passed on through investment cuts across the group. Our evidence is consistent with families taking actions to increase the likelihood that the firms under their control, and their control benefits, survive the crisis, at the expense of outside shareholders.

Keywords: blockholders, control, financial crisis, family

JEL Classification: G10, G14, G32