Family Firms


Burkhart, Michael, Fausto Panunzi, and Andrei Shleifer. 2003. “Family Firms.” Journal of Finance 58 (5): 2167-2201.


We present a model of succession in a ¢rm owned and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on what fraction of the company to £oat 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. 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.


Reprinted in T. Beck, ed., Entrepreneurship in Developing Countries, Edward Elgar Publishing Company, 2009.

Last updated on 07/30/2012