Does the presence of multiple and unrelated family controllers improve firm performance? Drawing on both agency and behavioral agency theories, we argue that multifamily firms outperform single-family firms since families in multifamily firms actively monitor owners’ socioemotional goals. Additionally, we suggest that a balanced distribution of control among the owning families facilitates the monitoring process. Finally, we argue that the focal relationship follows an inverted U-shaped pattern depending on the number of families controlling the firm. We test our hypotheses using a sample of Chilean publicly listed family firms. Our study extends current knowledge of the uniqueness of multifamily firms.

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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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