Performance and Behavior of Family Firms: Evidence from the French Stock Market

41 Pages Posted: 21 Sep 2004

See all articles by David Alexandre Sraer

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2004

Abstract

We look at the corporate performance of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, another third are founder controlled and the remaining third are heir-controlled family firms. We find that, in cross section, family firms largely outperform widely held corporations. This result holds for founder-controlled firms, but more surprisingly also for heir-managed firms. To explain this, we provide evidence consistent with the fact that, because of their different time horizons, heir-managed corporations have a comparative advantage when enforcing implicit insurance contracts with their labor force. More specifically, we find that: (1) employment in heir-managed firms is less sensitive to industry shocks; and (2) heirs pay lower wages. Finally, we discuss issues related to the endogeneity of performance/family regressions looking both at delisting and transitions from family to non-family status. We conclude that these issues may lead us to overestimate the performance of heirs compared to professionally-managed firms, but to underestimate the performance of heirs when compared to widely held firms.

Keywords: Family firms, management style, corporate performance

JEL Classification: D21, G32, L21

Suggested Citation

Sraer, David Alexandre and Thesmar, David, Performance and Behavior of Family Firms: Evidence from the French Stock Market (August 2004). CEPR Discussion Paper No. 4520. Available at SSRN: https://ssrn.com/abstract=593826

David Alexandre Sraer (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

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