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Post by Ellul on Apr 9, 2009 22:14:43 GMT 4
Inheritance Law and Investment in Family Firms Andrew Ellul Indiana University Bloomington - Department of Finance Marco Pagano University of Naples Federico II - Department of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI) Fausto Panunzi University of Bocconi - Department of Economics (DEP); Fondazione Eni Enrico Mattei (FEEM); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR) January 22, 2009 FEEM Working Paper No. 6.2009 Abstract: Entrepreneurs may be constrained by the law 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 10,245 firms from 32 countries over the 1990-2006 interval, we find that stricter inheritance law is associated with lower investment in family firms, while it leaves investment unaffected in non-family firms. Moreover, as predicted by the model, inheritance law affects investment only in family firms that experience a succession. papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1340907_code114544.pdf?abstractid=1331368&mirid=2
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