Studying a monthly panel of European listed non-financial firms, we document a negative effect of economic policy uncertainty (EPU) on firm value but a positive effect on the valuation premium of founding family firms. These findings are confirmed in a propensity score–matched sample and remain robust to a battery of tests addressing omitted variable bias and measurement error. The lower EPU-sensitivity of founding family firms is concentrated in politically connected firms operating in low-corruption environments. Additional analyses show that founding family firms' valuation premium is more pronounced for R&D-intensive firms with less diversified and less labor-intensive business models. Overall, our results support the view that founding family firms are more resilient to uncertainty and may contribute to economic stability.

This paper considers the ownership structure of family firms to determine whether family control alleviates or exacerbates investment–cash flow sensitivity in the Euro zone. We find that family-controlled corporations have lower investment–cash flow sensitivities. Further, our results show that this reduced sensitivity is mainly attributable to family firms with no deviations between cash flow and voting rights and to family firms in which family members hold managerial positions. We also find that second largest shareholders affect family firms' sensitivity and are associated with either monitoring (non-family second blockholders) or collusion (family second blockholders). Overall, family control seems to mitigate investment inefficiencies that derive from capital market imperfections.