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 language | English |
|---|---|
| Publication date | 2018 |
| Number of pages | 43 |
| Publication status | Published - 2018 |
| Event | European Financial Management Association 2018 Annual Meetings - Università Cattolica del Sacro Cuore, Milan, Italy Duration: 27 Jun 2018 → 30 Jun 2018 Conference number: 27 https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2018-Milan/2018%20meetings.php |
Conference
| Conference | European Financial Management Association 2018 Annual Meetings |
|---|---|
| Number | 27 |
| Location | Università Cattolica del Sacro Cuore |
| Country/Territory | Italy |
| City | Milan |
| Period | 27/06/2018 → 30/06/2018 |
| Internet address |
Keywords
- Family control
- Investment-cash flow sensitivity
- Family firm
- Financial flexibility
- Germany