Dynastic management and historical origins: the Italian experience

Abstract

In this paper we explore the long run determinants of the emergence of family firms and different types of corporate governance. Using a representative sample of Italian firms, we show that higher current levels of trust, related to the experience of a free commune in the Middle Ages, are negatively related to the probability of being a family firm and to observing a dynastic management. On the contrary, higher level of trust are positively related to the probability of appointing an external manager or an internal manager not belonging to the family dynasty. These results are confirmed by an instrumental variables strategy used to tackle endogeneity issues. Some policy implications are also discussed.