Family Firms and Labor Market Regulation

Abstract

In a panel of more than 6,900 firms in 28 countries over 10 years we provide evidence that family control and labor market regulation are substitute governance mechanisms. First, family firms have performance advantages over non-family firms in countries with less regulated labor markets. This is robust to matching and using survey-based instruments for family control. Second, in less regulated labor markets, family firms have lower employment level variations supporting the claim that labor relations drive family firms’ performance advantages. Third, the performance advantages in less regulated labor markets is smaller in industries with high labor intensity and high labor volatility.

Keywords: Family firms, Labor market regulation

JEL Classification: G32