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When Does the Family Govern the Family Firm?

Author

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  • Bøhren, Øyvind
  • Stacescu, Bogdan
  • Almli, Line F.
  • Søndergaard, Kathrine L.

Abstract

We find that the controlling family holds both the chief executive officer and chair positions in 79% of Norwegian family firms. The family holds more governance positions when it owns large stakes in small, profitable, low-risk firms. This result suggests that the family trades off expected costs and benefits by conditioning participation intensity on observable firm characteristics. We find that the positive effect of performance on participation is twice as strong as the positive effect of participation on performance. The endogeneity of participation, therefore, should be carefully accounted for when analyzing the effect of family governance on the family firm’s behavior.

Suggested Citation

  • Bøhren, Øyvind & Stacescu, Bogdan & Almli, Line F. & Søndergaard, Kathrine L., 2019. "When Does the Family Govern the Family Firm?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(5), pages 2085-2117, October.
    • Handle: RePEc:cup:jfinqa:v:54:y:2019:i:05:p:2085-2117_00
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    Cited by:

    1. Cheng, Chen & Li, Siming & Han, Jiajun, 2022. "Origin matters: How does institution imprint affect family business TFP?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    2. Ring, Marius, 2019. "Entrepreneurial Wealth and Employment: Tracing Out the Effects of a Stock Market Crash," MPRA Paper 107020, University Library of Munich, Germany, revised 06 Apr 2021.
    3. Chen, Mengyuan & Xiao, Jason Zezhong & Zhao, Yang, 2021. "Confucianism, successor choice, and firm performance in family firms: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 69(C).
    4. Yeh, Yin-Hua & Liao, Chen-Chieh, 2021. "Are non-family successors all the same? Inside-promoted vs. outside-sourced," Journal of Corporate Finance, Elsevier, vol. 71(C).
    5. Fan, Joseph P.H. & Yu, Xin, 2022. "Do founding families downgrade corporate governance? The roles of intra-family enforcement," Journal of Corporate Finance, Elsevier, vol. 73(C).

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