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Family Firms

Author

Listed:
  • Mike Burkart
  • Fausto Panunzi
  • Andrei Shleifer

Abstract

We present a model of succession in a firm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on what fraction of the company to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. This theory of separation of ownership from management includes the Anglo‐Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross‐country evidence.

Suggested Citation

  • Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2201, October.
    • Handle: RePEc:bla:jfinan:v:58:y:2003:i:5:p:2167-2201
    DOI: 10.1111/1540-6261.00601
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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