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Local Political Uncertainty, Family Control, and Investment Behavior

  • Mario Daniele Amore and Alessandro Minichilli

Estimating difference-in-differences models on a comprehensive data set of Italian companies, we provide novel insights into the literature on political uncertainty and firm investment. We first establish that local political uncertainty leads to declining investment. Next, we show that family control neutralizes this effect: Family firms are more likely than other firms to invest during politically uncertain times, especially when operating in industries dependent on public spending and/or managed by family members. Finally, we document that this investment resilience of family firms under political uncertainty translates into significantly greater profitability and growth.

Corresponding author
* Amore,, Bocconi University; Minichilli,, Bocconi University Invernizzi Center for Research on Innovation, Organization, Strategy and Entrepreneurship (ICRIOS) and SDA Bocconi School of Management.
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We thank an anonymous referee, Pat Akey, Mircea Epure, Paul Malatesta (the editor), Alexei Ovtchinnikov, Andrea Polo, Sebastian Schwenen, Carlos Serrano, and Michael Kurschilgen, as well as participants at the 2016 Financial Management Association Conference, the 2016 International Finance and Banking Society Conference, and seminar participants at the University of Edinburgh, Universitat Pompeu Fabra, and Technische Universität München for useful comments and suggestions. We also thank Fabio Quarato for data support. All errors remain our own.

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Journal of Financial and Quantitative Analysis
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