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Family firms and the Great Recession: out of sight, out of mind?

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  • Leandro DÂ’Aurizio

    ()
    (Bank of Italy)

  • Livio Romano

    ()
    (European University Institute)

Abstract

This paper studies how family firms reacted to the 2008 economic crisis by adjusting employment. In particular, we look at how the geographical distribution of the workforce may have led to divergencies between family and non-family firms. Using a difference-in-difference approach, we provide empirical evidence that paths of adjustment did diverge, with family firms systematically preferring to safeguard workplaces close to headquarters. We offer a new theoretical framework, the social recognition motive, that is consistent with this finding; it is based on contributions in the literature on corporate governance that stress the importance of the non-pecuniary benefits of the owner's control of the family firm. The social recognition motive originates from the psychological relation linking the family-firm owner with his or her community. The theory also offers a clear set of predictions that are all confirmed by the data. Alternative explanations, although theoretically plausible, seem to be ruled out in our setting.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 905.

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Date of creation: Apr 2013
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Handle: RePEc:bdi:wptemi:td_905_13

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Keywords: family firms; Great Recession; employment; social pressure;

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  7. Andrea Bassanini & Eve Caroli & Antoine Rebérioux & Thomas Breda, 2011. "Working in family firms: less paid but more secure? Evidence from French matched employer-employee data," EconomiX Working Papers 2011-38, University of Paris West - Nanterre la Défense, EconomiX.
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Citations

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Cited by:
  1. Brunello, Giorgio & Bassanini, Andrea & Caroli, Eve, 2014. "Not in my Community: Social Pressure and the Geography of Dismissals," Economics Papers from University Paris Dauphine 123456789/13579, Paris Dauphine University.
  2. Andrew Ellul & Marco Pagano & Fabiano Schivardi, 2014. "Employment and Wage Insurance within firms - Worldwide Evidence," EIEF Working Papers Series 1402, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2014.
  3. Leandro D’Aurizio & Tommaso Oliviero & Livio Romano, 2014. "Family Firms, Soft Information and Bank Lending in a Financial Crisis," CSEF Working Papers 357, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  4. Bassanini, Andrea & Caroli, Eve & Rebérioux, Antoine & Breda, Thomas, 2011. "Working in family firms: less paid but more secure? Evidence from French matched employer-employee data," CEPREMAP Working Papers (Docweb) 1110, CEPREMAP.
  5. Bjuggren, Carl Magnus, 2014. "Sensitivity to Shocks and Implicit Employment Protection in Family Firms," Working Paper Series 1028, Research Institute of Industrial Economics.

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