Family Firm Local Involvement and the Local Home Bias Phenomenon

Long Range Planning, Forthcoming

32 Pages Posted: 14 Jun 2014 Last revised: 2 Nov 2016

See all articles by Giulia Baschieri

Giulia Baschieri

University of Bologna - Department of Management

Andrea Carosi

University of Sassari - Department of Economics and Business

Stefano Mengoli

University of Bologna - Department of Management

Date Written: December 14, 2015

Abstract

Research has documented that most of retail and institutional investors exhibit a strong preference for stocks issued by nearby listed firms (i.e. Local Home Bias). This phenomenon shapes corporate market value and the cost of funding. In this paper, we investigate whether the Local Home Bias is enhanced in family firms as a consequence of their symbiotic connection with the local community. Using a dataset of 2,951 Italian firm-year observations (1,481 are family firms) over the period 1999-2011, we find that Local Home Bias is not a widespread phenomenon and mainly occurs in founding family firms where the founder serves as CEO. The Local Home Bias is absent in non-family firms or in family firms where the owner has acquired control through a market transaction. Overall, results suggest that locally committed family firms trigger investor preference for local stocks and, in doing so, exploit the dedicated local clientele which shrinks the cost of funding. Ultimately, we argue the social contributions of family firms to the local community could even have opportunistic traits and a non-trivial economic effect.

Keywords: Family Firms, Local Commitment, Local Home Bias, Firm Performance, Family Involvement

JEL Classification: G3, G32, G11

Suggested Citation

Baschieri, Giulia and Carosi, Andrea and Mengoli, Stefano, Family Firm Local Involvement and the Local Home Bias Phenomenon (December 14, 2015). Long Range Planning, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2449403 or http://dx.doi.org/10.2139/ssrn.2449403

Giulia Baschieri

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, Bologna 40126
Italy

Andrea Carosi (Contact Author)

University of Sassari - Department of Economics and Business ( email )

Via Muroni, 25
Sassari, Sassari 07100
Italy
+39 079 213036 (Phone)

Stefano Mengoli

University of Bologna - Department of Management ( email )

Via Capo di Lucca, 24
http://stefanomengoli.weebly.com/
Bologna, Bologna 40132
Italy

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