Investment policy at family firms: Evidence from Thailand

Using a unique, multi-year sample of publicly traded non-financial companies in Thailand, I find the level of family ownership influences the level of investment. The results are from an emerging market, which features concentrated, family-dominated corporate ownership structures, including ownership pyramids. Firms with higher levels of family ownership show higher investment ratios, whether the ratio is a fixed assets-based measure or a cash flow-based measure. The investment ratios exhibit greater sensitivity to financial slack. However, these two relations are dependent on the level of family ownership. I find evidence of underinvestment at lower levels of family ownership, plus evidence of overinvestment at family firms which employ pyramidal ownership structures. The results have implications for the efficiency of investment at family-owned firms.