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Family ownership and risk taking

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  • Lee, Eun Jung
  • Chae, Joon
  • Lee, Yu Kyung

Abstract

We study the relation between a controlling family's ownership and their company's risk taking behavior. By investigating comprehensive ownership data in Korea where most companies have controlling families, we find that non-linear U-shaped relation exists between family ownership and a firm's risk taking. Our results are robust in various tests considering endogeneity problems and with different proxies. We argue that a family with less ownership takes less risk for pursuing their private benefit, while a family with more ownership aligns their interest with their company's by taking more value enhancing risky projects.

Suggested Citation

  • Lee, Eun Jung & Chae, Joon & Lee, Yu Kyung, 2018. "Family ownership and risk taking," Finance Research Letters, Elsevier, vol. 25(C), pages 69-75.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:69-75
    DOI: 10.1016/j.frl.2017.10.010
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    Cited by:

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    4. Orlando Llanos-Contreras & Jose Arias & Carlos Maquieira, 2021. "Risk taking behavior in Chilean listed family firms: a socioemotional wealth approach," International Entrepreneurship and Management Journal, Springer, vol. 17(1), pages 165-184, March.
    5. Cheng Zhang & Le Luo, 2021. "Board diversity and risk-taking of family firms: Evidence from China," International Entrepreneurship and Management Journal, Springer, vol. 17(4), pages 1569-1590, December.
    6. Luis Otero-González & Luis-Ignacio Rodríguez-Gil & Milagros Vivel-Búa & Aracely Tamayo-Herrera, 2022. "Family Ownership, Corporate Governance and Risk-Taking," JRFM, MDPI, vol. 15(3), pages 1-15, February.

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    More about this item

    Keywords

    Family firm; Controlling shareholder; Risk taking;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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