Sensitivity to Shocks and Implicit Employment Protection in Family Firms

Reprint No. 2015:65

Author(s): Carl Magnus BjuggrenYear: 2015 Title: Journal of Economic Behavior & Organization Volume (No.): 119 (November) Pages: 18–31
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Preliminary version

In this study I find that employment in family firms is less sensitive to performance and product market fluctuations. I show this by investigating aggregate fluctuations at the industry level as well as idiosyncratic firm level shocks. By differentiating between temporary and permanent shocks at the firm level, I find that family firms appear to be less anxious to translate temporary shocks into changes in employment. This supports the idea that family firms are able to offer their employees implicit employment protection. Family firms are believed to have longer time horizons, and are as owners more easily identified with their company and its actions. These are features that could make family firms more cautious in terms of adjusting their employment. Unlike previous contributions, I am able to identify all family firms, both private and public, by using full population data from tax registers.

Bjuggren, Carl Magnus (2015), "Sensitivity to Shocks and Implicit Employment Protection in Family Firms". Journal of Economic Behavior & Organization 119(November), 18–31.

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