Factors Associated with Strategic Corporate Decisions in Family Firms: Evidence from Sweden

By using detailed ownership data from Sweden, we investigate the factors associated with corporate investment decisions in family firms compared to nonfamily firms. We find that the family owner's portfolio diversification level is to some extent, and the use of dual‐class share mechanism by the family owner is strongly, associated with reduced corporate investment. We further demonstrate where entrenched family owners, holding dual‐class shares, canalize their firm free cash flows to: they prefer to distribute it as dividends with catering motivations. They opt to pay higher dividends over increasing corporate investment, which indicates some evidence of private benefits of control.