Family Ownership Concentration Research Articles

The Choice between Family CEO and Non-Family CEO: What Are the Determinants?

We examine the factors that influence family firms that are no longer run by the founder, to appoint a chief executive officer from the family rather than from outside the family. Based on agency and signaling theories, we hypothesize that the concentration of family ownership and the presence of the founder increase the likelihood of appointing a family CEO, whereas the gap between voting rights and cash-flow rights (excess voting rights) decreases it. Our regression analyses of Canadian S&P/TSX family firms over the 2002–2008 period confirm our theory that contextual governance factors are good predictors of the type of CEO chosen in family firms.

The impact of family control and CEO duality on earning management: The mediating role of corporate commitment to business ethics

Earnings management is a practice that often occurs in companies, especially in family companies where most stakeholders focus more on profit information. Management always tries to maintain consistent profit figures to gain positive perceptions from stakeholders. Companies controlled by families can take riskier business decisions to maintain the family business socio-emotionally, such as being able to manage and maintain the image well, even though this affects business management. Some studies have examined earnings management in family companies, but only a few have examined the role of corporate commitment to business ethics in creating ethical financial reporting behavior in companies. The sample of this research was 541 manufacturing companies listed on the Indonesian Stock Exchange in 2019-2021 which were analyzed using Multiple Linear Regression Analysis. The research results showed that family ownership and CEO duality have a positive effect on earnings management, but the family members on board have no effect on earnings management. Corporate commitment to business ethics can moderate by strengthening the relationship between family ownership and CEO duality on earnings management, but cannot moderate the relationship between family members on board on earnings management. Investors need to consider aspects of family ownership concentration and CEO duality to see the potential for earnings management.

Does Political Connection and Family Business Create or Destroy Firm Performance: Lessons Learned from Malaysia

This study examined the effect of the family business on firm performance and whether the political connection moderates these relationships. Final sample consisted of 1,969 firm-year observations from 2013 - 2017. Family characteristics and political connections data were hand-collected from annual report and financial data were extracted from Eikon Datastream. We found that family chairmanship and high family ownership concentration can destroy firm performance, exhibited by low Tobin Q. However, the moderating effect of political connection between family business and firm performance showed a positive and significant association. This implies that politicians in the family firm can create firm performance as they can work as external watchdogs. Additional analysis showed that political connections in high family ownership can destroy firm performance. These findings provide practical implications for regulators and investors that they should be mindful of the designation of family members and appointment of politicians in firms as it may create agency costs and destroy firm performance. This study adds to the limited, albeit important evidence on the joint effect of politically connected firms and family businesses on firm performance. Keywords: family business, political connection, firm performance

Financial reporting quality, audit quality and idiosyncratic volatility: moderating role of family ownership concentration

Financial reporting quality, audit quality and idiosyncratic volatility: moderating role of family ownership concentration

Financial Reporting quality, audit quality and idiosyncratic volatility: Moderating role of family ownership concentration

Financial Reporting quality, audit quality and idiosyncratic volatility: Moderating role of family ownership concentration

Family Ownership Concentration and Debt in Dividends Policies

This study aims to examine whether or not family control benefiting the internal and external governance mechanism to mitigate to agency problems affecting dividends in a capital market environment to improve investor protection such as Indonesia. The quantitative analysis model was used to test the hypotheses based on the panel data analysis of 58 family firms listed from 2012 to 2019, and the random effect technique (pooled EGLS). The findings indicate that internal governance mechanism (family ownership and family board representation) are irrelevant to the dividend policy. However, external governance mechanism (debt) negatively affects dividends. This means that debt plays a significant role in influencing dividend policies. In addition, it provides the issue from institutional setting, when legal protection for minority shareholders is improving, the governance role of families become less effective to monitor the firms.

Family firms and innovation: a revisit to SEW perspective

ABSTRACT Extant literature on innovation in family firms has generated mixed results regarding the preference of family firms for innovation. By integrating literature on family ownership and management, we propose an inverted U-shaped relationship between family firm ownership concentration and innovation. Our Poisson regression-based model on a sample of 532 family firms from India for ten years shows that family ownership concentration follows an inverted U-shaped relationship with innovation. Our findings further suggest that the family CEO moderates this inverted U-shaped relationship.

Family Ownership, Corporate Governance and Risk-Taking

This paper analyses the effect of family ownership and the characteristics of the board of directors on the risk assumed by Spanish non-financial companies. The sample consists of 176 Spanish non-financial companies listed on Spanish stock exchanges during the period 2012–2015. The results show that the level of family ownership concentration affects the level of exposure to risk non-linearly and confirms the importance of the characteristics of the board of directors in risk-taking.

Clan culture and family ownership concentration: Evidence from China

This study explores a cultural determinant of family ownership concentration of a corporate. Using hand-collected Chinese genealogy information and a panel of Chinese listed family firms, we find robust evidence that clan culture influences are associated with a significantly higher family ownership concentration. By taking advantage of firm owner birthplace information, we are able to separate the impact of inherited clan culture from that of external environmental factors. To further establish causality, we also employ an instrumental variable (IV) regression strategy and explore the underlying mechanisms.

The Effect of Family Ownership on the Relationship between Busy Directors and Stock Price Crash Risk for Listed Firms on the Indonesia Stock Exchange

This study explores the impact of busy directors on the stock price crash risk if an individual holds three or more board positions. Since Indonesia has adopted a two-tier system, directors refer to Commissioners. Most of the literature suggests that the main risk factor for stock price crashes arises from the tendency of management to withhold adverse news from investors regarding compensation contracts and career issues. This research aims to verify whether busy directors help to limit managerial opportunistic behavior. Results show that multiple positions bring no effect on the stock price crashes risk due to cross over interaction which negated the substantial effect on the risk of stock price crashes. As a country with high family ownership concentration, the results illustrate that family firms in Indonesia will strengthen the influence of Commissioners who hold multiple positions in reducing stock price crashes risk. This investigation uses a sample of companies listed in the Indonesia Stock Exchange over the period between 2014 and 2019. The generalized method of moment (GMM estimator) is used as a research method to reduce endogeneity problems. DOI: https://doi.org/10.26905/jkdp.v25i1.4909

The Role of Political Connections and Family Ownership in Increasing Firm Value

In the face of business competition, a company strategy is needed by seeking and exploiting opportunities in the business environment, one of which is through political connections. Ownership structure plays an essential role in the company to determine the firm performance. The high concentration of family ownership has the power to reduce agency conflicts between management and stakeholders in a company. Concentrated ownership can serve as corporate governance mechanism for better and effective monitoring of management. This study was conducted to determine empirical evidence of the effect of political connections and family ownership structure on firm value. The sample in this study was 390 data of the manufacturing company. The data analysis used is moderating regression analysis. The results of this study are a positive influence of political connections and family ownership structure on firm value. The results showed that the more the company had a strong political connection and was controlled by the family, the more the firm value would increase. The interaction of political connections can strengthen the influence of family ownership on firm value. It proves that the family ownership structure plays a role in determining political connections in Indonesia, especially in manufacturing companies. The existence of empirical evidence that shows that the firm value controlled by a politically connected family is higher than companies that are not connected politically, which implies investors to invest in companies that are politically connected and companies controlled by families with majority ownership because it is proven to increase firm value.

THE ROLE OF FAMILY GOVERNANCE BEYOND FINANCIAL RATIOS: AN INTEGRATED PERSPECTIVE ON FAMILY FIRMS’ SURVIVAL

In the years following the economic and financial crisis, Italy, where most firms are family-owned, has seen the demise of more companies than any other country. To avoid a similar disaster in the future, it is important to understand which determinants influence firms’ survival. Stemming from financial and family business literature, this paper investigates the role of financial ratios and family corporate governance in predicting family firms’ survival probability. To obtain empirical evidence, it performs a mediating regression analysis using a sample of 273 Italian family firms. The main findings show that family ownership concentration and the presence of a family CEO increase firms’ survival probability, while a high number of family members involved in the firm and the co-presence of more generations hinder it.

Cash holdings and firm performance relationship: Do firm-specific factors matter?

This study shows how the relationship between cash holdings and firm performance is moderated by several firm-specific factors such as state-ownership, corporate governance attributes, family ownership, and ownership concentration. By considering a sample of Chinese firms, this study provides strong evidence that the cash holdings and performance association is significantly moderated by firm-specific attributes. Specifically, this study documented that cash holdings improve the performance of firms having strong corporate governance. Further, family ownership and ownership concentration negatively affect the relationship between cash and performance, while state-ownership positively moderates this relationship. Overall, the findings elaborate that firm-specific attributes are important factors influencing the association between cash holdings and firm performance.

What Drives Family Firms’ Overseas Acquisitions? A Differentiated Socioemotional Wealth Approach

Family decision-makers make strategic choices which span a mixed gamble between non-economic (or socioemotional) and economic reference points, leading to heterogeneous out-comes. By considering family firms’ international acquisitions as mixed gambles, the aim of this article is to theorize and test whether, at different levels of family ownership concentra-tion, family decision-makers are confronted with trade-offs among financial, current and prospective socioemotional wealth (SEW) gains and losses which could lead to differences in their acquisition choices. Furthermore, we explore the moderating role of performance aspirations and family leadership to define the boundary conditions of SEW. Tested on a panel (2000-2014) of Italian family firms, our main findings suggest that family firms with high family ownership concentration show a higher propensity towards international acquisitions when they experience below-target performance and are led by a family CEO, as they prioritize financial and prospective SEW gains, sacrificing current SEW.

Nearby or Faraway? Family Firms’ FDI Location Choices under Internal and External Threats

Stemming from the bifurcation bias approach, this article investigates whether there is a relationship between family ownership concentration and cultural distance in foreign direct investments’ (FDIs’) portfolio and to what extent contingency factors, such as internal (below target performance) or external (global financial crisis) threats, can impact this relationship. Our findings suggest that family firms with concentrated ownership are more affected by bifurcation bias, pursuing FDIs in less culturally distant locations, while also showing a greater ability to fix such bias, and undertake FDIs in more culturally distant locations when the occurrence of internal and external threats forces family owners to revise their priorities.

Board Independence and Earnings Management: Evidence from Italy

This research aims to analyze the relationship between the characteristics of the Board of Directors (BoD) and the effectiveness of the monitoring of earnings manipulation activities in family – controlled companies in Italy. In particular, specific hypotheses relating to the link between those aspects of the Board, that substantiate its independence, and earnings quality have been formulated to verify whether the mechanisms for monitoring management activity are less effective in these companies.
 
 This study applies a univariate and multivariate methods on a sample of Italian listed company over the period 2014-2016.  Earnings management is defined by the proxy of abnormal working capital accrual (AWCA) estimed model according to DeFond and Park (2001). Proxies for corporate governance mechanism are the board size, the level of board independence, the CEO non-duality and the interaction between the last two variables.
 
 The research shows that independent directors are not, as in other contexts, a factor that contributes to earnings quality, in the same way that the separation of the offices of Chairman of the Board of Directors and Chief executive Officer (CEO) does not appear to be relevant to this end.
 
 The study aims to provide a double contribution. First, the research represents one of the few studies concerning the Italian context with its peculiarities, taking into consideration the earnings management issue in companies with a high concentration of family ownership.
 
 Secondly, this study aims to further stimulate the debate on the most effective features of structure and composition of the BoD in family-controlled companies: specifically, the conclusions could lead to a reconsideration of the validity of certain characters of the boards that defines independence.

Ownership, board, and enterprise risk management

This paper analyses the effect of family ownership and the characteristics of the board of directors on the implementation level of enterprise risk management (ERM) in Spanish non-financial companies. The sample consists of 162 Spanish non-financial companies listed on Spanish stock exchanges and markets during 2012–2015. The results obtained show that the relationship between the level of family ownership concentration and the implementation level of an ERM system has a non-linear structure. Therefore, a reduction in implementation for moderate ownership levels is observed, although this increases with high ownership values. Regarding corporate governance, our study confirms the importance of certain characteristics of the board of directors, such as the size and the figure of the shareholder director in the implementation of formal ERM systems.

Family ownership concentration and real earnings management: Empirical evidence from an emerging market

The paper examines the effect of family ownership concentration (FMOC) on real earnings management (REM) in manufacturing firms listed on Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchan...

The impact of family ownership concentration on the relationship between the characteristics of board of directors and earnings management

The impact of family ownership concentration on the relationship between the characteristics of board of directors and earnings management

Impact of ownership structure and dividend on firm performance and firm risk

PurposeThe purpose of this paper is to examine the influence of ownership structure and dividend payouts over firm’s profitability, valuation and idiosyncratic risk. The authors further investigate if corporate performance is sector dependent.Design/methodology/approachThe study employs signaling and bankruptcy theories to evaluate the influence of ownership structure and dividend payout over a firm’s corporate performance. The authors use a panel regression approach to measure the performance of family owned firms against that of widely held firms.FindingsThe study confines to firms operating out of emerging markets. The results show that family owned firms are dominant with concentrated ownership. The management pays lower dividend leading to lower valuation and higher idiosyncratic risk. The study further illustrates that family ownership concentration and family control both influence firm performance and level of risk. The findings indicate that information asymmetry and under diversification lead to increased idiosyncratic risk, resulting in the erosion of firm’s value. Results also confirm that firms paying regular dividends are less risky and, hence, command a valuation premium.Originality/valueThe evidence supports the proposition that information asymmetry plays a significant role in explaining dividend payouts pattern and related impacts on corporate performance. The originality of the paper lies in factoring idiosyncratic risk while explaining profitability and related valuation among emerging market firms.