Protecting the family legacy: The response of family firms to antitrust enforcement

Strategy & Business Policy

Speaker: Mario Daniele Amore

Associate Professor - Bocconi University

Conference  Jouy-en-Josas/Room S 121

Abstract

Prosecution for antitrust violations can be costly due to increased competitive threats and reputational damages. Although firms’ financial responses to such violations have been studied, we know little about how these differ across owner identities. We argue that family owners’ responses to antitrust enforcement actions are distinctive, bringing to bear intangible assets in the form of symbolically and socially significant family leadership to restore reputation. Whereas nonfamily firms raise equity capital and invest to cope with the effects of antitrust actions, to preserve control, families avoid diluting their ownership and invest less. However, because family and firm reputation and economic wealth are closely tied, family owners dismiss the old guard and recruit trusted senior family leadersto restore stakeholder confidence, especially when the antitrust enforcement leads to sanctions and reputational exposure is high. Bringing in these family executives speeds market share recovery. In short, family firms address both socioemotional and economic challenges, doing less financially while leveraging family leadership. These notions are supported in a major longitudinal study of responses to antitrust enforcement actions by Italian firms.

Keywords: family business; sanctions; corporate governance; antitrust