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Family Firms and the Great Recession: Out of Sight, Out of Mind?

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  • Leandro D’Aurizio
  • Livio Romano

Abstract

The purpose of this paper is to study how family firms, compared to widely-held companies, reacted to the 2008 economic crisis in terms of employment adjustments. By using a difference-in-difference approach, we provide empirical evidence that di- vergent paths of adjustment between family and non-family firms exist, with family firms systematically preferring to safeguard workplaces close to the firm's headquarters, compared to other plants. We offer a new theoretical framework consistent with these findings, that we define the social recognition motive, based on the psychological rela- tion linking the family owner with his community of reference. We investigate possible alternative explanations for the results, most of whom can be ruled out in our setting. Finally, we test more directly for the validity of the social recognition theory, finding encouraging results in line with the predictions.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2011/28.

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Date of creation: 2011
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Handle: RePEc:eui:euiwps:eco2011/28

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Keywords: Family Firms; Great Recession; Employment; Social Pressure;

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References

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  1. Laurent Bach & Nicolas Serrano-Velarde, 2009. "The Power of Dynastic Commitment," Working Papers 0924, Oxford University Centre for Business Taxation.
  2. Federico Cingano & Paolo Pinotti, 2009. "Politicians at work. The private returns and social costs of political connections," Temi di discussione (Economic working papers) 709, Bank of Italy, Economic Research and International Relations Area.
  3. Samuel Bowles & Herbert Gintis, 2001. "Social Capital and Community Governance," Working Papers 01-01-003, Santa Fe Institute.
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  5. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2009. "Matching Firms, Managers, and Incentives," EIEF Working Papers Series 0901, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2009.
  6. Claudio Michelacci & Olmo Silva, 2007. "Why So Many Local Entrepreneurs?," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 615-633, November.
  7. 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.
  8. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
  9. Andrew E. Clark & Andreas Knabe & Steffen Rätzel, 2008. "Unemployment as a Social Norm in Germany," SOEPpapers on Multidisciplinary Panel Data Research 132, DIW Berlin, The German Socio-Economic Panel (SOEP).
  10. David Sraer & David Thesmar, 2004. "Performance and Behavior of Family Firms : Evidence from the French Stock Market," Working Papers 2004-24, Centre de Recherche en Economie et Statistique.
  11. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  12. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  13. Dufwenberg, Martin & Lundholm, Michael, 1997. "Social Norms and Moral Hazard," Working Paper Series 1997:28, Uppsala University, Department of Economics.
  14. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers 2383, C.E.P.R. Discussion Papers.
  15. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
  16. Ernst Fehr & Urs Fischbacher, 2004. "Social norms and human cooperation," Macroeconomics 0409026, EconWPA.
  17. repec:hal:wpaper:halshs-00564972 is not listed on IDEAS
  18. Mark Granovetter, 2005. "The Impact of Social Structure on Economic Outcomes," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 33-50, Winter.
  19. Favero, Carlo A & Giglio, Stefano W & Honorati, Maddalena & Panunzi, Fausto, 2006. "The Performance of Italian Family Firms," CEPR Discussion Papers 5786, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. 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," IZA Discussion Papers 5842, Institute for the Study of Labor (IZA).
  2. 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.
  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. 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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