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The effect of family control on investment-cash flow sensitivity

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  • Jung-Hua Hung
  • Yi-Ping Kuo

Abstract

This article examines the effect of family control on investment-cash flow sensitivity and distinguishes the effect between agency problems and asymmetric information. Using an unbalanced panel data of 1206 Taiwanese firms for the time period 1999 to 2008, we find that family control increases the investment-cash flow sensitivity. In family controlled firms, compared with in firms that are not family controlled, investment is more sensitive to cash flow, which is related to asymmetric information problems.

Suggested Citation

  • Jung-Hua Hung & Yi-Ping Kuo, 2011. "The effect of family control on investment-cash flow sensitivity," Applied Financial Economics, Taylor & Francis Journals, vol. 21(12), pages 897-904.
    • Handle: RePEc:taf:apfiec:v:21:y:2011:i:12:p:897-904
    DOI: 10.1080/09603107.2010.539533
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    Cited by:

    1. Valentina Peruzzi, 2017. "Does family ownership structure affect investment-cash flow sensitivity? Evidence from Italian SMEs," Applied Economics, Taylor & Francis Journals, vol. 49(43), pages 4378-4393, September.
    2. Murro, Pierluigi & Peruzzi, Valentina, 2019. "Family firms and access to credit. Is family ownership beneficial?," Journal of Banking & Finance, Elsevier, vol. 101(C), pages 173-187.
    3. Quarato, Fabio & Cambrea, Domenico Rocco & Calabrò, Andrea, 2021. "Investment decisions of family firms in the three largest euro countries: the role of the financial crisis," Finance Research Letters, Elsevier, vol. 42(C).

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