Nick Bloom, Labor Topics, 2011 LABOR TOPICS Nick Bloom “Bossonomics”: economics of CEOs and family firms

Nick Bloom, Labor Topics, 2011 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 Looks at 20 largest publicly quoted firms in each country – figures for medium and smaller firms much more extreme

Nick Bloom, Labor Topics, 2011 share family CEO (2 nd + generation) share founder CEO (1 st 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, 2011 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, 2011 “Inherited control and firm performance” American Economic Review, 2006 Francisco Perez-Gonalez

Nick Bloom, Labor Topics, 2011 Reasonably well cited paper for it’s age

Nick Bloom, Labor Topics, 2011 Family-firm paper which uses clever identification (1/2) Looks at the management transitions in US publicly quoted firms ( ) 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, 2011 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 2 nd 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 (2/2)