Article first published online: 11 SEP 2003
The Journal of Finance
Volume 58, Issue 5, pages 2167–2202, October 2003
How to Cite
Burkart, M., Panunzi, F. and Shleifer, A. (2003), Family Firms. The Journal of Finance, 58: 2167–2202. doi: 10.1111/1540-6261.00601
- Issue published online: 11 SEP 2003
- Article first published online: 11 SEP 2003
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 what fraction of the company 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. 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.