Investment policy in family controlled firms
AbstractWe explore the relation between family ownership and corporate investment policy. Our analysis centers on two incentives, risk aversion and extended investment horizons, which potentially influence the level and type of investments that family firms undertake. We find that family firms devote less capital to long-term investments than firms with diffuse ownership structures. When dividing long-term investment into its two components of R&D and capital expenditures, we note that family firms, relative to nonfamily firms, prefer investing in physical assets relative to riskier R&D projects. Additional tests indicate that family firms receive fewer patent citations per dollar of R&D investment relative to nonfamily firms. Overall, all empirical results indicate that family preferences for lower firm risk, across all family sub-types, affects corporate R&D spending and capital expenditures.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 36 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/jbf
Family business; Dual class shares; Founders; Heirs; Long-term investments; R&D spending; Capital expenditures;
Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- K2 - Law and Economics - - Regulation and Business Law
- M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting
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