The effect of family control on investment-cash flow sensitivity

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.

Acknowledgements

The authors gratefully acknowledge the helpful comments and suggestions received from the editor and the anonymous referee(s). In addition, many thanks for the financial support provided from the National Science Council (NSC96-2416-H-008-022-MY2).