We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (>95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners ? family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners.

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1 October 2024

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International Review of Financial Analysis 95(B) 2024

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DOI: 10.1016/j.irfa.2024.103427

https://www.sciencedirect.com/science/article/pii/S1057521924003594

This Journal article is published under the centre's Growth programme.