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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
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Handle: RePEc:eui:euiwps:eco2011/28
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  1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  13. Federico Cingano & Paolo Pinotti, 2013. "Politicians At Work: The Private Returns And Social Costs Of Political Connections," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 433-465, 04.
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  15. repec:hal:wpaper:halshs-00564972 is not listed on IDEAS
  16. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
  17. 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.
  18. Sraer, David & Thesmar, David, 2004. "Performance and Behaviour of Family Firms: Evidence from the French Stock Market," CEPR Discussion Papers 4520, C.E.P.R. Discussion Papers.
  19. Ernst Fehr & Urs Fischbacher, 2004. "Social norms and human cooperation," Macroeconomics 0409026, EconWPA.
  20. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
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