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Does Family Control Matter? International Evidence from the 2008-2009 Financial Crisis



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We study whether and how family control affects valuation and corporate decisions during the 2008-2009 financial crisis using a sample of more than 8,500 firms from 35 countries. During a financial crisis, controlling families may experience liquidity shocks and increasing risk aversion. Thus, they may have greater incentives than in normal times to use their power to cut productive investment or divert resources at the expense of minority shareholders. Our results support this view. Relative to other firms, family-controlled firms underperform and reduce their capital expenditures during the global financial crisis. We also find that financial constraints effectively limit conflicts of interest in family-controlled firms. Family firms with financial slack underperform most, while constrained family firms do not underperform. Our tests also show that non-family blockholder control is on net beneficial during the crisis, particularly for constrained firms.


blockholders, control, financial crisis, family, financial shock, firm value

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