The political behavior of family firms: Evidence from Brazil

Kin in the Game: How Family Ties Help Firms Overcome Campaign Finance Regulation

“…Notably, following the ban, 78 percent of contributions came from individuals in family firms, suggesting that the policy increased political activism in such firms. Compared to non-family firms, the family firms in our sample are 20 percentage points (pp) more likely to make corporate donations, and contributing family firms are more likely to engage in financial rent-seeking-they are more likely to receive subsidized credit from Brazil's National Development Bank (Balán et al, 2022). Overall, family firms in Brazil wield significant political influence and profit from their political investments.…”

“…Family firms are the most common corporate structure in the developing world and a staple of capitalism in Latin America (Schneider, 2013). They are long-lived, display lower productivity, and have a comparative advantage in rent-seeking (Balán et al, 2022;Bennedsen et al, 2007;Villalonga and Amit, 2020). In Brazil, they are relevant political actors: they display high levels of political activism and benefit handsomely from their contributions.…”

“…Previous research shows that family firms are less productive (Bennedsen et al, 2007) and more likely to engage in rent-seeking (Morck and Yeung, 2004;Morck et al, 2005). In Brazil, family firms are particularly active political actors and obtain substantial benefits from their political donations (Balán et al, 2022). Before they were ruled illegal, almost 53 percent of corporate contributions in our sample came from family firms.…”

“…This dataset was previously used inBalán et al (2022). See SI Section I andBalán et al (2022) for a more detailed description of the data.23 This is the number of unique firms for which the data contain information about at least one year.…”

“…This dataset was previously used inBalán et al (2022). See SI Section I andBalán et al (2022) for a more detailed description of the data.23 This is the number of unique firms for which the data contain information about at least one year. It does not translate into the sample size of firm-level regression in this article since (i) every firm is not present in the sample every year, and (ii) all variables are not available for every firm every year.24 The number of public and private companies in Brazil in 2014 was 16,092-this information comes from Brazil's national registry of legal entities.…”