Level Of Family Ownership Research Articles

International Diversification

International Diversification can have both benefits and costs. In this paper, we argue that a firm's level of International Diversification depends not only upon firm-specific characteristics such as its size and the industry to which it belongs, but also upon its ownership structure and the ability of its management to carry out an international strategy. We test our hypotheses using a panel of Italian firms. Our findings show that a high level of family ownership has a negative effect on International Diversification, but that an inactive market for corporate control negates this. We found too that when the board of a family-owned firm has a higher proportion of independent directors, International Diversification is greater. We also found that similar to the family-ownership effect, a high level of state ownership results in less International Diversification. Overall our results confirm that corporate governance variables affect International Diversification.

Are Founding Families Special Blockholders? - An Investigation of Controlling Shareholder Influence on Firm Performance

This paper examines how family and non-family ownership affects the performance of Swiss listed firms from 2003 to 2010. We distinguish between these two types of controlling shareholders since they have different objectives. We hypothesise that only family shareholders have a real incentive to reduce agency costs whereas non-family blockholders are similar to widely held companies. Our results show that family firms are more profitable than companies that are widely held or have a non-family blockholder. We investigate the impact of different features of family firms on performance, and document that the level of family ownership, the generation of the family and the active involvement of the family play an important role for market valuation.

Affiliate Firm Performance in Large Family Business Groups: Reflection on Agency Theory

The predictions of classical agency theory and the principal-principal perspective on agency theory differ in their view of the level of family ownership in a firm. This study examines affiliate fi...

Acquisitions of family owned firms: boon or bust?

Using a hand-collected dataset, we examine the acquisitions of 307 family owned targets for the period 1984–2000 to study the conflicting roles of entrenchment and alignment of interests in these firms. We find that bidders experience the strongest announcement market reaction at the medium levels of family ownership. However, bidder returns are negatively impacted when acquiring a public target family firm, even controlling for the percent owned by the family. We also find that overall firms that acquire family owned targets experience significant large negative returns in the long run. However, the long run results are also sensitive to the ownership structure of the family firm target with medium levels resulting in insignificant returns in the long run.

Family ownership and firm performance: evidence from Taiwanese firms

PurposeUsing the panel data of 465 Taiwanese listed companies and taking into consideration endogeneity issues this paper aims to examine the influence of family ownership on firm performances.Design/methodology/approachThe use of a panel data set encompassing a five‐year period enables one to examine both cross‐sectional and within‐firm variations in the relationships between family ownership and firm performances. The paper also uses a simultaneous equation system to account for the endogeneity between family ownership and firm performances, and apply the quadratic equations to identify the percentage of family ownership that maximizes firm performance.FindingsWhen either a profitability indicator (ROA) or a valuation indicator (Tobin's Q) is applied, the empirical results show that family ownership positively affects firm performance. The results also show that the profitability of a firm (ROA) first increases and then decreases with family ownership. In other words, when families have more than 30 per cent control of the firm, the potential for entrenchment and poor performance becomes greater.Originality/valueThis paper is the first to examine the relationships between family ownership and firm performances, while simultaneously addressing the issue of endogeneity and identifying the optimal level of family ownership in Taiwanese firms. The finding that family ownership positively affects firm performance elucidates why a family firm is one of the most important business development models in Taiwan. Meanwhile, the finding that the percentage of family ownership should not exceed 30 per cent to avoid the occurrence of poor performance also suggests that excessive family shareholdings may not be necessarily healthy for a family firm in Taiwan.

Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong

This paper empirically examines the relationship between the extent of voluntary disclosure and levels of family ownership and board independence including the influence of an independent chairman. Using hand-collected data on voluntary disclosure for a sample of 273 listed firms in Hong Kong for the year 2002, the results show that at moderate to low levels of family shareholding (25% or less), the convergence of interest effect is dominant and the extent of voluntary disclosure is relatively low. At higher levels of family shareholding (more than 25%), the entrenchment effect dominates and is associated with higher voluntary disclosure. In addition, the results show that the appointment of an independent chairman is positively associated with the level of voluntary disclosure. Most importantly, the appointment of an independent chairman appears to mitigate the influence of family ownership on voluntary disclosures, and holds for firms with a non-independent chairman. While the extent to which independent non-executive directors are appointed to the board is positively associated with voluntary disclosure, the role of such directors is mitigated by the role of chairman.

Family ownership and acquisition behavior in publicly‐traded companies

AbstractMuch of the literature on corporate acquisitions has focused on managerial incentives for making acquisitions but has underemphasized the role played by the social context of major shareholders. This study of Fortune 1000 firms argues that the priorities and risk preferences of family owners can have important implications not only for the volume but also for the diversifying nature of their acquisitions. Agency and family business perspectives are used to derive expectations concerning the acquisitions behavior of family owners. Consistent with both perspectives, and owners' desire to reduce business risk, we find that family ownership is inversely related to the number and dollar volume of acquisitions. However, whereas agency theorists differ about how ownership concentration influences whether acquisitions are diversified, the family firm literature is more definitive. The latter suggests that given family owners' desire to retain control of their firms for offspring, their wealth must remain concentrated. Hence they can most easily reduce the risk of their wealth portfolio by diversifying the business—that is, through diversifying acquisitions. Consistent with this logic, we found the propensity to make diversifying acquisitions to increase with the level of family ownership. Copyright © 2009 John Wiley & Sons, Ltd.

Ownership structure, internal governance and earnings management in Hong Kong

This study examines whether ownership structure and internal governance mechanisms are associated with earnings management in Hong Kong. We hypothesize that the earnings management of a firm is associated with the ownership structure including ownership concentrations, different ownership concentration levels of family held companies and substantial institutional investors; and internal governance mechanisms including firms that are audited Big 4 auditors and proportion of outside directors. The non-discretionary accruals are measured using modified Jones model with crosssectional basis. We employ multivariate model to investigate the relationship between discretionary accruals and various independent variables. Our results show that discretionary accruals are positively associated with high/low level of family ownership and negatively related to firms that are audited by Big 4 auditor as hypothesized. Our results reveal that the controlling shareholders in family businesses can expropriate minority shareholders by accounting manipulations and that independent nonexecutive directors cannot effectively constrain opportunistic earnings management. This requires regulators and standard setters to improve the extent of investor protection and to increase the independence of outside directors on the board.

Family control and dilution in mergers

We analyze the influence of the level as well as the change in family ownership on value creation in mergers involving newly public firms. Our findings suggest that acquirers with low levels of family ownership earn lower abnormal returns than do those with high levels of ownership. In addition, families with low ownership in their firm are more likely to use cash as the medium of exchange, thus avoiding dilution and maintaining their control. Further, acquisitions of targets with low levels of family ownership are associated with greater value creation. Our results are consistent with the entrenchment of families at low levels of ownership and a better alignment of their interests with those of minority shareholders at high levels of ownership. Finally, we find that dilution of the family’s ownership, due to the use of stock as the medium of exchange, alters the family’s incentives and thus influences firm value.

Family Control and Corporate Governance: Evidence from Taiwan

A recent stream of literature shows that family control is central in most countries of the world, but little research exists regarding family control and corporate governance. This paper analyses family control and corporate governance using a sample of Taiwanese firms. The results suggest that family control is even more prevalent than previously suggested and that a non‐linear relation exists between family control and relative firm performance. Family‐controlled firms that have low levels of control have lower relative performance than both family‐controlled firms with high levels of control and widely held firms. This is consistent with the conflict of interest between majority and minority shareholders being the greatest when the majority shareholder’s level of control is high enough to influence a firm’s decision‐making process but ownership is low enough that the benefits of expropriation outweigh the costs. Furthermore, a positive valuation effect exists when controlling families hold less than 50% of a firm’s board seats. Taken together, the results in this paper suggest that when family control is central, high levels of family ownership and low levels of family board representation are effective ways of mitigating the separation of cash flow rights and control and, thus, decreasing the conflict of interest between majority and minority shareholders.

The Measurement of Family Material Well-Being

This paper reports on the development of measures offamily material well-being, based on observations of ownership and consumption behavior in a sample of 1, 169 New Zealand families. Factor analysis of 49 indicator measures revealed that the material well-being of the families could be measured along two distinct yet correlated dimensions: the level offamily ownership and the amount of economizing behavior the family was required to undertake. Both dimensions were of moderate to good reliability and showed systematic correlations with a series of concurrent and predictive validity measures. The advantages of direct measures offamily material well-being over the traditional alternatives of income, expenditure, or family budget information are discussed.