Knowledge that Transforms

We survey 153 empirical studies of family firms and document 192 operational definitions representing 25 distinct definition types. These definitions can be decomposed into five recurring, codable dimensions: ownership, management, board representation, embeddedness, and succession. We relate these dimensions to economic mechanisms including agency conflicts, residual control rights, transaction costs, and dynastic control. Alternative definitions select systematically different populations and yield materially different estimates of firm performance and innovation. Definition choice is largely unrelated to the research question, except in succession studies. Ownership thresholds track private enforcement of self-dealing rules, but not statutory shareholder rights or rule of law. We conclude that the family firm is a family of related constructs rather than a single latent construct. Definitions should therefore match the family-firm construct implied by the research question, and results should be reported across alternative classification rules.

Startups face a trade-off between short-term profitability and long-term growth. Their cash flows are said to follow a so-called J-curve. The shape of the curve depends on investors’ financing capacity: their ability to sustain prolonged periods of negative cash flow. US venture capitalists are often believed to have greater financing capacity. We examine a large Swedish dataset with detailed cash flow information. Swedish startups backed by US venture capitalists experience deeper J-curves, with larger short-term losses and higher long-term sales, relative to those backed by non-US venture capitalists. These results are consistent with US venture capitalists having greater financing capacity: they can provide more funding directly and have better access to later-stage investors.

In credit markets where borrower types are observable, is it welfare-maximizing for a rate-setting institution to offer different rates to different borrower types, or to pool them at a common rate? Moral hazard favours separation; deadweight default costs favour pooling, since compressing rates reduces aggregate defaults through hazard rate heterogeneity. We derive the condition determining which force dominates: the ratio of default cost intensity to moral hazard intensity. We show that there is a single threshold value of this ratio such that separation strictly dominates below it, complete pooling strictly dominates above it, and the two are welfare-equivalent exactly at it, for every possible value of the ratio. The result does not depend on information being scarce: even though borrower types are observable throughout, pooling can still dominate separation when default costs are sufficiently large, provided the maintained compression and effort conditions we state precisely continue to hold; we conjecture, but do not formally establish, that the same logic extends to imperfect information if the threshold, recomputed for that weaker information structure, continues to be exceeded. The welfare criterion is utilitarian surplus; the efficiency claim is surplus maximisation, not Pareto improvement.

We examine how the 2016 Municipal Advisor Regulatory Reform, which professionalized municipal advisors by imposing standards of conduct and minimum competency requirements, affected advisory firms and issuers. Using a difference-in-differences (DiD) research design, we find that the reform improved the quality of financial advice provided by independent municipal advisory firms relative to dealer firms. Specifically, independent municipal advisors assemble higher-quality financing teams and ensure greater financial disclosure compliance and timeliness in the post-reform period. These improvements provide tangible economic benefits to issuers through lower bond issuance costs and smaller underwriter fees. Finally, we document that independent advisory firms gain market share and charge higher fees relative to dealer firms after the reform. Overall, our study provides novel evidence linking the professionalization of financial intermediaries to improvements in the quality of advice, financial transparency, and issuer borrowing costs. Data Availability: Data are available from the commercial and public sources identified in the paper.