TY  - JOUR
AU  - Burkart,Mike
AU  - Panunzi,Fausto
AU  - Shleifer,Andrei
TI  - Family Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8776
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8776
L1  - http://www.nber.org/papers/w8776.pdf
N1  - Author contact info:
Mike Burkart
Department of Finance
Stockholm School of Economics, Room 940
PO Box 6501
SE-113 83 Stockholm
SWEDEN
Tel: 4687369678
Fax: 468312327
E-Mail: Mike.Burkart@hhs.se

Fausto Panunzi
Dipartimento di Economia
Universita Bocconi
Via Roentgen 1
20136 Milano
Tel: 39 02 5836 5327
E-Mail: fausto.panunzi@unibocconi.it

Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu
AB  - We present a model of succession in a firm controlled 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.
ER  -