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

Review of Financial Studies, Forthcoming

52 Pages Posted: 25 Nov 2011 Last revised: 2 May 2013

Karl V. Lins

University of Utah - Department of Finance

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: May 1, 2013

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

Suggested Citation

Lins, Karl V. and Volpin, Paolo F. and Wagner, Hannes F., Does Family Control Matter? International Evidence from the 2008-2009 Financial Crisis (May 1, 2013). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1964764 or http://dx.doi.org/10.2139/ssrn.1964764

Karl V. Lins (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Paolo F. Volpin

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

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

Hannes F. Wagner

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://faculty.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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