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

  • Leandro D’Aurizio
  • Livio Romano

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

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Date of creation: 2011
Handle: RePEc:eui:euiwps:eco2011/28
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  1. Andrew Ellul & Marco Pagano & Fausto Panunzi, 2009. "Inheritance Law and Investment in Family Firms," EIEF Working Papers Series 0915, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2009.
  2. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2009. "Matching Firms, Managers and Incentives," Economics Working Papers ECO2009/14, European University Institute.
  3. David Sraer & David Thesmar, 2007. "Performance and Behavior of Family Firms: Evidence from the French Stock Market," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 709-751, 06.
  4. Samuel Bowles & Herbert Gintis, 2001. "Social Capital and Community Governance," Working Papers 01-01-003, Santa Fe Institute.
  5. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
  6. 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.
  7. Laurent Bach & Nicolas Serrano-Velarde, 2009. "The Power of Dynastic Commitment," Working Papers 0924, Oxford University Centre for Business Taxation.
  8. Dufwenberg, M. & Lundholm, M., 1997. "Social Norms and Moral Hazard," Papers 1997-28, Uppsala - Working Paper Series.
  9. 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.
  10. 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.
  11. Ernst Fehr & Urs Fischbacher, 2004. "Social norms and human cooperation," Macroeconomics 0409026, EconWPA.
  12. Michelacci, Claudio & Silva, Olmo, 2006. "Why So Many Local Entrepreneurs?," CEPR Discussion Papers 5828, C.E.P.R. Discussion Papers.
  13. Andrew E. Clark & Andréas Knabe & Steffen Rätzel, 2009. "Unemployment as a Social Norm in Germany," Post-Print halshs-00754675, HAL.
  14. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  15. Andrea Bassanini & Thomas Breda & Eve Caroli & Antoine Rebérioux, 2010. "Working in family firms: less paid but more secure? Evidence from French matched employer-employee data," PSE Working Papers halshs-00564972, HAL.
  16. 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.
  17. 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.
  18. repec:hal:wpaper:halshs-00564972 is not listed on IDEAS
  19. 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 1155-1177, December.
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