Family firms

Arbeitspapier

We present a model of succession in a firm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better manager than the heir, and describe how the founder's decision is shaped by the legal environment. Specifically, we show that, in legal regimes that successfully limit the expropriation of minority shareholders, the widely held professionally managed corporation emerges as the equilibrium outcome. In legal regimes with intermediate protection, management is delegated to a professional, but the family stays on as large shareholders to monitor the manager. In legal regimes with the weakest protection, the founder designates his heir to manage and ownership remains inside the family. This theory of separation of ownership from management includes the Anglo-Saxon and the Continental European patterns of corporate governance as special cases, and generates additional empirical predictions consistent with cross-country evidence.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 74.2002

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: Family firms ; legal protection ; corporate governance ; Familienunternehmen ; Unternehmensnachfolge ; Börsengang ; Führungskräfte ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Burkart, Mike ; Panunzi, Fausto ; Schleifer, Andrei
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/119682
• Last update: 10.03.2025, 11:44 AM CET