Factors Associated with Strategic Corporate Decisions in Family Firms: Evidence from Sweden
International Review of Finance, Forthcoming
44 Pages Posted: 21 May 2018 Last revised: 7 Nov 2019
Date Written: May 4, 2018
By using detailed ownership data from Sweden, we investigate the factors associated with corporate investment decisions in family firms compared to non-family firms. We find that the family owner’s portfolio diversification level is to some extent, and the use of dual-class share mechanism by the family owner is strongly associated with reduced corporate investment. We further show where entrenched family owners, holding dual-class shares, canalize firm free cash flows to: they prefer to distribute it as dividends with catering motivations. They opt for paying higher dividends over increasing corporate investment, which indicates some evidence of private benefits of control.
Keywords: family firms, portfolio diversification, corporate investment, dual-class shares, entrenchment
JEL Classification: G32, G34, G35, G39
Suggested Citation: Suggested Citation