Labor investment decisions in family Firms: The under-firing behavior

This study investigates labor investment inefficiency in family firms from a specific socioemotional wealth (SEW) perspective, particularly under-firing behavior. Family firms differ from their non-family counterparts and are more concerned about their reputation and emotional goals apart from financial objectives, leading them to make inadequate labor investment decisions. Based on a sample of French-listed firms in the SBF 120 index from 2005 to 2021, the results support the SEW perspective and show that family firms and their involvement in management lead to inefficient labor investment decisions, specifically through the under-firing problem. Additional analyses show that the over-investment problem is mitigated in family firms operating in a highly competitive environment. Moreover, inefficient labor investments are more pronounced in socially responsible family firms.