Structure Of Family Firms Research Articles

Achieving Governance Disclosure – the Surprising Case of an Emerging Market Family Business

Since 1961, when the first paper to clearly recognize and study family firms was published, the business literature has seen an increasing trend in the number of articles relating to family firms. One reason why interest in this field has grown may be because family-owned firms do not behave as expected by the predominant theoretical framework. Family-ownership has been shown to be unique in its effect on the firm when compared to other firm ownership structures. Such divergent behavior is disconcerting, knowing that, globally, family firms may be the most common firm structure. Governance is one of the largest streams of research within the family business literature. Regrettably, most research on family businesses is focused on Western developed economies suggesting that theory building when it comes to family business governance has been largely driven by the Anglo-Saxon corporate governance model. This is unfortunate because we know that context plays a vital role in governance outcomes and in family firm behavior. One of the important challenges faced by developing countries is governance disclosure, with potentially grave repercussions for their economic futures. The aim of this research is to help understand the motivations behind the decision of a family, non-listed firm, in a developing country context, to disclose governance information on its board members. We propose a larger role for institutional isomorphism at the intersection of the family, governance, disclosure, and developing country literatures. To this end, we identified a family business in the emerging market of Lebanon that has demonstrated this phenomenon. Despite the odds, this firm was able to overcome multiple challenges - family firm structure, secretive culture, no legal requirements, information sensitivity - to ultimately share this information with the public. Our case study helps us suggest a context-specific governance disclosure model based on the institutional theoretical framework.

Female Entrepreneurs as Board Directors of the Largest Russian Joint‐Stock Companies, 1870–1900

Previous research has only mentioned that women from family firms often served as members of the Boards of Directors of joint‐stock companies in the last third of the nineteenth century, but it has not explored the extent to which they were actually involved in managerial activities or in day‐to‐day operations. Using a new database of twenty‐eight large joint‐stock companies mainly in the textile industry, this article combines archival research and prosopographical analysis to demonstrate that women had the capacity to engage in these activities and, in many cases, did so extensively. Particular attention is paid to educational background, relationship to child‐bearing and child‐rearing, and the blending of kinship and family firm structure in the context of the popularity of incorporation as joint‐stock companies. The analysis is situated within and contributes to a broader historiography of women, property, and corporations in and beyond late nineteenth‐century Russia.

Determinanty struktury finansowania przedsiębiorstw rodzinnych. Czy rodzina ma znaczenie?

The purpose of this article was to check the influence of family involvement in management and ownership on financial structure in family firms. We analyse debt ratio, size, industry, family involvement in management and family involvement in ownership using linear regression. The received results indicate that family involvement in ownership and management can affect the financial structure of family firms. This paper contributes to better understanding of the multidimensional aspect of the financial decision-making in family businesses.

IMPACT OF FAMILY OWNERSHIP ON FINANCING DECISIONS: A COMPARATIVE ANALYSIS OF COMPANIES LISTED AT THE KSE

The current study attempts to investigate debt and dividend policies under the umbrella of capital structure’s theories in both organizational types i.e. family owned business (FOB) and non-family owned business (NFOB). Two threshold points of ownership structure (25% & 50%) were used to distinguishing FOB from NFOB. A sample of 280 listed firms at the KSE was collected for the period 2002- 13.Generalized Method of Moments (GMM) was applied on panel data to estimate the coefficients of variables. The empirical results indicated the weak application of pecking order theory and higher payout ratio in family firms comparatively. The study provided explanation regarding speedier rebalancing the target capital structure of family firms due to easier access to debt and long term presence of the family in the firm. However, FOBs smooth dividends to lesser extent than their counterpart NFOBs indicate lower agency and information asymmetry problems in them. SECP as well as stock exchanges are advised to bring required changes in corporate laws to ensure lucid and verifiable disclosure regarding dividend policy in their reports, prospectus and websites etc

An Analysis of Auditorss Risk Assessment and Client Acceptance Decisions in Family Firms

Very little is known about how auditors assess risks in publicly-traded family firms, despite the importance of these firms to the U.S. economy. Our study experimentally examines auditors’ assessments of control risk and fraud risk, as well as auditors’ client acceptance decisions for family firms vs. non-family firms with varying levels of audit committee (AC) strength. In the experiment, 60 audit partners and managers from the Big 4 audit firms and another large international audit firm examine a case describing a hypothetical company, and evaluate that company as a potential new audit client. We find that auditors assess both control risk and fraud risk to be higher for family firms than for non-family firms, and they are less likely to make client acceptance decisions for family firms. Moreover, auditors assess risks to be greatest, and audit client desirability to be the lowest, for family firms with weak ACs. Auditors’ assessment of control risk mediates the effect of the family firm structure on auditors’ willingness to pursue the firm as an audit client. Our findings suggest that auditors perceive more severe agency conflicts to be present in family firms than in non-family firms, consistent with entrenchment theory, according to which family members may behave opportunistically to extract rents and potentially expropriate the firm’s resources at the expense of minority shareholders.

Cash Holdings, Use of Debt and Dividend Structure of Family Firms

In this study we examine the relation between firm’s financial structure and family ownership. We develop a theoretical model of the precautionary cash holdings. Our empirical results show that the fraction of a company’s shares that are held by the founding family members or their descendants influences the use of cash and equivalents, dividend policy and debt structure of a firm. Our results are robust to different estimation methods and alternative model specifications. We find that family firms tend to rely less on long-term debt financing, pay fewer dividends and carry higher precautionary cash balances.

Family firms and debt: Risk aversion versus risk of losing control

This study examines the effect of family management, ownership, and control on capital structure for 523 listed and unlisted Colombian firms between 1996 and 2006 (5,094 firm-year observations). The study finds that when families are involved in management, debt levels tend to be lower for younger firms when the founder is still present or when heirs act as managers, but trends higher as the firm ages. When families’ involvement derives from direct and indirect ownership, the family/debt relationship is positive, consistent with the idea that external supervision accompanies higher debt levels and reduces the risk of losing control. When families are present on the board of directors (but are not in management), debt levels tend to be lower, suggesting that family directors are more risk-averse. The results stress the tradeoff between two distinct motivations that determine the capital structure of family firms: Risk aversion pushes firms toward lower debt levels, but the need to finance growth and the risk of losing control make family firms prefer higher debt levels.