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Founding-Family Ownership and Firm Performance: Evidence from the S&P 500

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Author Info
Ronald C. Anderson (The Kogod School of Business at American University)
David M. Reeb
Abstract

We investigate the relation between founding-family ownership and firm performance. We find that family ownership is both prevalent and substantial; families are present in one-third of the S&P 500 and account for 18 percent of outstanding equity. Contrary to our conjecture, we find family firms perform better than nonfamily firms. Additional analysis reveals that the relation between family holdings and firm performance is nonlinear and that when family members serve as CEO, performance is better than with outside CEOs. Overall, our results are "inconsistent" with the hypothesis that minority shareholders are adversely affected by family ownership, suggesting that family ownership is an effective organizational structure. Copyright 2003 by the American Finance Association.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 58 (2003)
Issue (Month): 3 (06)
Pages: 1301-1327
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Handle: RePEc:bla:jfinan:v:58:y:2003:i:3:p:1301-1327

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  1. Jang, Hasung & Kang, Hyung-cheol & Park, Kyung Suh, 2005. "Determinants of Family Ownership: The Choice between Control and Performance," CEI Working Paper Series 2005-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Jara-Bertin, Mauricio & López-Iturriaga, Félix J., 2008. "Earnings Management and Contest to the Control: An Analysis of European Family Firms," MPRA Paper 9660, University Library of Munich, Germany. [Downloadable!]
  3. Bennedsen, Morten & Nielsen, Kasper & Pérez-González, Francisco & Wolfenzon, Daniel, 2005. "Inside the Family Firm," Working Papers 21-2005, Copenhagen Business School, Department of Economics. [Downloadable!]
  4. Mike Peng & Yi Jiang, 2006. "Family Ownership And Control In Large Firms: The Good, The Bad, The Irrelevant – And Why," William Davidson Institute Working Papers Series wp840, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  5. Desai, Sameeksha & Eklund, Johan E., 2008. "Ownership, Economic Entrenchment and Allocation of Capital," Ratio Working Papers 120, The Ratio Institute. [Downloadable!]
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  6. Antoin E. Murphy, 2004. "Corporate Ownership in France: The Importance of History," NBER Working Papers 10716, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Jörn Hendrich Block, 2008. "Family Management, Family Ownership and Downsizing: Evidence from S&P 500 Firms," SFB 649 Discussion Papers SFB649DP2008-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
  8. Ross Levine & Luc Laeven, 2007. "Complex Ownership Structures and Corporate Valuations," IMF Working Papers 07/140, International Monetary Fund. [Downloadable!]
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  9. Marianne Bertrand & Simon Johnson & Krislert Samphantharak & Antoinette Schoar, 2008. "Mixing Family With Business: A Study of Thai Business Groups and the Families Behind Them," NBER Working Papers 13738, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Morck, Randall, 2006. "How to Eliminate Pyramidal Business Groups: The Double Taxation of Inter-corporate Dividends and other Incisive Uses of Tax Policy," CEI Working Paper Series 2005-15, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
    Other versions:
  11. Morten Bennedsen & Kasper Nielsen & Francisco Pérez-González & Daniel Wolfenzon, 2005. "Inside the Family Firm: The Role of Families in Succession Decisions and Performance," CIE Discussion Papers 2005-13, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Sep 2005. [Downloadable!]
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