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Family firms have idiosyncrasies which may influence corporate governance. In that regard, this work's contribution is twofold. First, it compares corporate governance of family and non-family firms. Second, it further examines these firms, discriminating between firms listed in the Portuguese stock market index and the others. The sample includes 37 Portuguese listed firms, 16 listed in the Portuguese stock index, the PSI 20. Following a quantitative analysis, the findings show that family firms, especially the ones listed in PSI 20, have more independent members, tend to comply more with corporate governance recommendations, and display more corporate governance information on their websites than other firms. This suggests that family firms try to avoid information asymmetries, so as to evade mispricing, sustain their sustainability, and reduce agency costs. [ABSTRACT FROM AUTHOR]

Prior research is not conclusive whether information asymmetries or managerial discretion are the cause of observed investment-cash flow sensitivity. This paper examines the effect of family firms' governance heterogeneity on firm's investment-cash flow sensitivity in Brazil. The Brazilian economic and corporate governance context present several idiosyncratic features, including weak minority shareholder protection, an underdeveloped capital market, macro-economic uncertainties, the presence of controlling shareholders (especially families), and the excessive use of control-enhancing mechanisms, allowing us to explore in greater detail the drivers of investment-cash flow sensitivity. We find that investment is more sensitive to cash flow for firms with a highly entrenched family presence (divergence between corporate control and voting rights coupled with family management) than in less entrenched family firms. This result emerges primarily due to financial constraints from asymmetric information, rather than agency problems of free cash flow from abuse of managerial discretion. Our findings shed new light on the role of excessive control rights in investment decisions, allowing family managers to reallocate capital to cope with financial constraints in times of economic uncertainties. • Family entrenched firms reduce the investment-cash flow sensitivity. • Entrenched owners are stewards in times of economic uncertainty. • Underinvestment due to information asymmetries seems to prevail. • There is no evidence of private benefits of control in family entrenched firms. [ABSTRACT FROM AUTHOR]