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Investment policy at family firms: Evidence from Thailand

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  • Connelly, J. Thomas

Abstract

Using a unique, multi-year sample of publicly traded non-financial companies in Thailand, I find the level of family ownership influences the level of investment. The results are from an emerging market, which features concentrated, family-dominated corporate ownership structures, including ownership pyramids. Firms with higher levels of family ownership show higher investment ratios, whether the ratio is a fixed assets-based measure or a cash flow-based measure. The investment ratios exhibit greater sensitivity to financial slack. However, these two relations are dependent on the level of family ownership. I find evidence of underinvestment at lower levels of family ownership, plus evidence of overinvestment at family firms which employ pyramidal ownership structures. The results have implications for the efficiency of investment at family-owned firms.

Suggested Citation

  • Connelly, J. Thomas, 2016. "Investment policy at family firms: Evidence from Thailand," Journal of Economics and Business, Elsevier, vol. 83(C), pages 91-122.
  • Handle: RePEc:eee:jebusi:v:83:y:2016:i:c:p:91-122
    DOI: 10.1016/j.jeconbus.2015.08.003
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    More about this item

    Keywords

    Family ownership; Investment–cash flow sensitivity; Capital investment; Financing constraints; Pyramids; Thailand;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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