Inheritance Law and Investment in Family Firms

Entrepreneurs may be constrained by the law to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,245 firms from 32 countries over the 1990-2006 interval, we find that stricter inheritance law is associated with lower investment in family firms, while it leaves investment unaffected in non-family firms. Moreover, as predicted by the model, inheritance law affects investment only in family firms that experience a succession.


Issue Date:
2009
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/50330
Total Pages:
61
JEL Codes:
G32
Series Statement:
IM
6.2009




 Record created 2017-04-01, last modified 2017-08-25

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