Family Control and the Sensitivity of Investment to Cash Flow: Evidence from a MultiEquation Modelling Approach

Johannes Beyenbach, Daniel Powell, Marc Steffen Rapp

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We empirically examine the influence of family control on the sensitivity of a firm’s investment to cash flow. Implementing a dynamic multi-equation investment model, we find – in line with intuition but contrary to previous research – higher sensitivities for family-controlled firms. This pattern becomes stronger once we take into account financial constraints or use the 2008-2010 financial crisis as an exogenous liquidity shock. In addition, we find investments of family firms to be less sensitive to investment opportunities. Overall, our results are consistent with the view that family prefer to finance their investments by internal funds and adjust their investments accordingly.
Original languageEnglish
Publication date2018
Number of pages43
Publication statusPublished - 2018
EventEuropean Financial Management Association 2018 Annual Meetings - Università Cattolica del Sacro Cuore, Milan, Italy
Duration: 27 Jun 201830 Jun 2018
Conference number: 27
https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2018-Milan/2018%20meetings.php

Conference

ConferenceEuropean Financial Management Association 2018 Annual Meetings
Number27
LocationUniversità Cattolica del Sacro Cuore
CountryItaly
CityMilan
Period27/06/201830/06/2018
Internet address

Keywords

  • Family control
  • Investment-cash flow sensitivity
  • Family firm
  • Financial flexibility
  • Germany

Cite this

Beyenbach, J., Powell, D., & Rapp, M. S. (2018). Family Control and the Sensitivity of Investment to Cash Flow: Evidence from a MultiEquation Modelling Approach . Paper presented at European Financial Management Association 2018 Annual Meetings, Milan, Italy.
Beyenbach, Johannes ; Powell, Daniel ; Rapp, Marc Steffen. / Family Control and the Sensitivity of Investment to Cash Flow : Evidence from a MultiEquation Modelling Approach . Paper presented at European Financial Management Association 2018 Annual Meetings, Milan, Italy.43 p.
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Beyenbach, J, Powell, D & Rapp, MS 2018, 'Family Control and the Sensitivity of Investment to Cash Flow: Evidence from a MultiEquation Modelling Approach ' Paper presented at, Milan, Italy, 27/06/2018 - 30/06/2018, .

Family Control and the Sensitivity of Investment to Cash Flow : Evidence from a MultiEquation Modelling Approach . / Beyenbach, Johannes; Powell, Daniel; Rapp, Marc Steffen.

2018. Paper presented at European Financial Management Association 2018 Annual Meetings, Milan, Italy.

Research output: Contribution to conferencePaperResearchpeer-review

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AU - Beyenbach, Johannes

AU - Powell, Daniel

AU - Rapp, Marc Steffen

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N2 - We empirically examine the influence of family control on the sensitivity of a firm’s investment to cash flow. Implementing a dynamic multi-equation investment model, we find – in line with intuition but contrary to previous research – higher sensitivities for family-controlled firms. This pattern becomes stronger once we take into account financial constraints or use the 2008-2010 financial crisis as an exogenous liquidity shock. In addition, we find investments of family firms to be less sensitive to investment opportunities. Overall, our results are consistent with the view that family prefer to finance their investments by internal funds and adjust their investments accordingly.

AB - We empirically examine the influence of family control on the sensitivity of a firm’s investment to cash flow. Implementing a dynamic multi-equation investment model, we find – in line with intuition but contrary to previous research – higher sensitivities for family-controlled firms. This pattern becomes stronger once we take into account financial constraints or use the 2008-2010 financial crisis as an exogenous liquidity shock. In addition, we find investments of family firms to be less sensitive to investment opportunities. Overall, our results are consistent with the view that family prefer to finance their investments by internal funds and adjust their investments accordingly.

KW - Family control

KW - Investment-cash flow sensitivity

KW - Family firm

KW - Financial flexibility

KW - Germany

KW - Family control

KW - Investment-cash flow sensitivity

KW - Family firm

KW - Financial flexibility

KW - Germany

M3 - Paper

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Beyenbach J, Powell D, Rapp MS. Family Control and the Sensitivity of Investment to Cash Flow: Evidence from a MultiEquation Modelling Approach . 2018. Paper presented at European Financial Management Association 2018 Annual Meetings, Milan, Italy.