Inheritance Law and Investment in Family Firms

Inheritance Law and Investment in Family Firms

Andrew Ellul, Marco Pagano, Fausto Panunzi

Series number :

Serial Number: 

Date posted :

April 16 2008

Last revised :

May 12 2014
SSRN Share


  • succession • 
  • family firms • 
  • inheritance law • 
  • growth • 
  • investment

Entrepreneurs may be legally bound to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers.

Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,004 firms from 38 countries in 1990-2006, we find that stricter inheritance law is associated with lower investment in family firms, but does not affect investment in non-family firms. Moreover, as the model predicts, inheritance law affects investment only in family firms that experience a succession.


Fellow, Research Member
Istituto di Economia Politica & IGIER, Università Bocconi