Family Firms and Contractual Institutions
This paper offers new evidence on the relationship between contractual institutions, family management, and aggregate performance. The study creates a new firm-level database on management and ownership structures spanning 134 regions in 11 Europea...
| Main Authors: | , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/139191554304091289/Family-Firms-and-Contractual-Institutions http://hdl.handle.net/10986/31532 |
| Summary: | This paper offers new evidence on the
relationship between contractual institutions, family
management, and aggregate performance. The study creates a
new firm-level database on management and ownership
structures spanning 134 regions in 11 European countries. To
guide the empirical analysis, it develops a model of
industry equilibrium in which heterogeneous firms decide
between family and professional management when the latter
are subject to contracting frictions. The paper tests the
model's predictions using regional variation in trust
within countries. Consistent with the model, the finding
show that there is sorting of firms across management modes,
in which smaller firms and those in regions with worse
contracting environments are more likely to be family
managed. These firms are on average 25 percent less
productive than professionally managed firms, and moving
from the country with the least reliable contracting
environment to the most increases total factor productivity
by 21.6 percent. Family management rather than ownership
drives these results. |
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