Inheritance tax, shareholder protection, and the market value of family firms: A cross‐country analysis
Why this work is in the frame
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Bibliographic record
Abstract
Abstract Research Summary We examine the relationship among inheritance taxes, shareholder protection, and the family firms' market value. Drawing on the family firm, corporate governance, and institutional complementarities literature, we argue that inheritance taxes act as external corporate governance mechanisms for decoupling business families' socioemotional goals. However, this depends upon minority investor protections. In strong protection countries, the incentives for family self‐governance created by high inheritance taxes are offset by the loss of business family autonomy inherent in strong shareholder protection. Using a sample of 284 firms across 31 countries, we provide support for these arguments. Results suggest that inheritance and shareholder protection laws are substitutive external corporate governance mechanisms to align business family and nonfamily shareholders' interests. Managerial Summary We investigate how inheritance taxes and shareholder protection laws interact to generate several outcomes that can benefit or harm family firms' market value. We argue that high rates of inheritance taxes in a country push business families to focus more on firm value maximization and less on pursuing family‐centric goals, thus increasing firm value. However, we further argue that the positive role of inheritance taxes on family firms' market value weakens when the country also exhibits strong shareholder protection laws. Therefore, inheritance and shareholder protection laws substitute for one another when they intersect in business families. We find evidence consistent with these ideas when examining a sample of publicly traded firms across 31 countries. Our results corroborate that policymakers' concerns regarding the protection of minority shareholders must not consider only investor protection laws, but also how investor protection interact with other institutions such as inheritance law.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.002 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.001 | 0.002 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it