Date of This Version
February 2009
Abstract
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.
Recommended Citation
Panunzi, Fausto; Ellul, Andrew; and Pagano, Marco, "Inheritance Law and Investment in Family Firms" (February 19, 2009). Fondazione Eni Enrico Mattei Working Papers. Paper 266.
https://services.bepress.com/feem/paper266