Nick Bloom, Macro Topics, Spring 2009 MACRO TOPICS Nick Bloom Heterogeneity and Reallocation.
Nick Bloom, Labor Topics, 2015 LABOR TOPICS Nick Bloom “Bossonomics”: economics of CEOs and...
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Transcript of Nick Bloom, Labor Topics, 2015 LABOR TOPICS Nick Bloom “Bossonomics”: economics of CEOs and...
Nick Bloom, Labor Topics, 2015
LABOR TOPICS
Nick Bloom
“Bossonomics”: economics of CEOs and family firms
Nick Bloom, Labor Topics, 2015
Family firms are extremely common, particularly in developing countries (1/2)
Data from “Corporate ownership around the world” by La Porta, Lopez-de-Silanes and Shleifer, JF 1999.
Looks at 20 largest publicly quoted firms in each country – figures for medium and smaller firms much more extreme
Nick Bloom, Labor Topics, 20150 .2 .4 .6 .8
IndiaGreece
PortugalBrazil
ItalyNorthern Ireland
Republic of IrelandGreat Britain
ChinaGermanyAustraliaCanadaPolandFrance
USJapan
Sweden
mean of family mean of foundermean of government
share family CEO (2nd+ generation)
share founder CEO (1st generation)
share government owned
Ownership shares from Bloom and Van Reenen (2010, JEP)
Family firms are extremely common, particularly in developing countries (2/2)
Nick Bloom, Labor Topics, 2015
Argentina
Australia
Brazil
Canada
Chile
China
FranceGermanyGreat Britain
Greece
India
Italy
Japan
Mexico
New Zealand
Poland
Portugal
Republic of Ireland
Sweden
United States
0.2
.4.6
.8
0 50 100 150 200
Correlation=0.872
Family and founder owned firms are common in countries with weak rule of law
Source: Bloom, Genakos, Sadun and Van Reenen (2012, Academy of Management Perspectives). Size of circle is number of interviews
World Bank Contract Enforcement Quality Ranking (2009)
Sh
are
of f
irms
run
by
fam
ily o
r fo
und
ers
Nick Bloom, Labor Topics, 2015
Primary reason seems to be the difficulty in separating ownership and control
Legal protection for investors is often weak for shareholders in developing countries – i.e. Indian legal system
As a result families rarely sell out and use external management, as is common in the US (i.e. Wal-Mart)
This is a still very under researched topic simply because of a lack of data, so papers focus on Denmark and the US.
Nick Bloom, Labor Topics, 2015
“Inherited control and firm performance”
American Economic Review, 2006
Francisco Perez-Gonalez
Nick Bloom, Labor Topics, 2015
Family-firm paper which uses clever identification – high-frequency CEO change
• Looks at the management transitions in US publicly quoted firms (1980-2001) with concentrated family holdings
• Publicly quoted less likely to be family controlled, but still finds 335 transitions with (prior) family ownership
• In basic statistics reports that:• A third (122) of transitions are to other family members• Family CEOs are 8 years younger on average
Nick Bloom, Labor Topics, 2015
• Looks at the transition and find that announcement that a firms founding CEO will step-down leads to:• Big stock rise if the next CEO is not a family-member• Big drop if the next CEO is a family member
• Drop driven by those from “non-selective colleges” (defined as outside top 189 US Colleges)
• Finds similar differences in accounting measures like Return on Assets
• This was from Perez-Gonzalez PhD thesis but was not his main paper (a 2nd year paper I think)• So for empirical work worth pushing analysis as hard to
tell where this will eventually end up!
Family-firm paper which uses clever identification – high-frequency CEO change
Nick Bloom, Labor Topics, 2015
“Inside the family firm: the role of families in succession decisions and performance”
Quarterly Journal of Economics, 2007
Morten BennedsenKasper NielsenFrancisco Perez-GonalezDaniel Wolfenzon
Nick Bloom, Labor Topics, 2015
• Exploits a massive Danish dataset matching up firms and families to look at the impact of family ownership
• Show that having a female first-born child (which is random, certainly in Denmark during 1980s and 1990s) is more likely to lead to continued family ownership
• This family ownership leads to far worse performance (growth, profits, etc) and the IV>>OLS
• Family underperformance particularly large in hi-tech, highly-skilled, rapidly changing industries
Family-firm paper which uses gender of first board as a clever identification approach