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Does family ownership create or destroy value? Evidence from Canada

Author

Listed:
  • Kuntara Pukthuanthong
  • Thomas J. Walker
  • Dolruedee Nuttanontra Thiengtham
  • Heng Du

Abstract

Purpose - – The purpose of this paper is to examine whether and how family ownership enhances or damages firm value. Design/methodology/approach - – The paper studies a sample of Canadian companies listed on the Toronto Stock Exchange (TSX) between 1999 and 2007 and apply multivariate regression with firm value as a dependent variable. The paper measures firm value as Tobin ' s Q and ROA based either on net income or EBITDA. The independent variables include family firm dummy and ownership percentage. Findings - – It is found that control-enhancing mechanisms which are often employed by family companies add value to companies. Furthermore, it is found that agency conflicts between ownership and management are less costly than those between majority and minority shareholders, suggesting that family ownership helps resolve the agency conflicts between ownership and management and in turn enhances firm value. Finally, it is found that family companies with founders as CEOs outperform those with descendants as CEOs. Research limitations/implications - – The paper studies Canadian family firms; as such, the sample size is not relatively large. Nonetheless, the results should be generalized as Canada is one of the largest markets in the world and have high integration with the rest of the world. Practical implications - – The results suggest investors should invest in family ownership firms. Originality/value - – The paper shows whether firm ownership increases firm value and the determinant of family firm value.

Suggested Citation

  • Kuntara Pukthuanthong & Thomas J. Walker & Dolruedee Nuttanontra Thiengtham & Heng Du, 2013. "Does family ownership create or destroy value? Evidence from Canada," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 9(1), pages 13-48, February.
    • Handle: RePEc:eme:ijmfpp:v:9:y:2013:i:1:p:13-48
    DOI: 10.1108/17439131311298511
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    Citations

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    Cited by:

    1. Demircioğlu, Emre, 2014. "Organization performance and happiness in the context of leadership behavior (case study base on psychological well-beings)," MPRA Paper 61484, University Library of Munich, Germany.
    2. Rivo-López, Elena & Villanueva-Villar, Mónica & Lago-Peñas, Santiago, 2014. "Does the composition of the board matter? On the relationship between corporate governance and value creation," MPRA Paper 56597, University Library of Munich, Germany.
    3. Karartı, Tuncay, 2014. "Impact of ownership structure on leverage of non-financial firms in developing countries," MPRA Paper 61483, University Library of Munich, Germany.
    4. Muhammad Arif Khan & Xuezhi Qin & Khalil Jebran & Abdul Rashid, 2020. "The Sensitivity of Firms’ Investment to Uncertainty and Cash Flow: Evidence From Listed State-Owned Enterprises and Non-State-Owned Enterprises in China," SAGE Open, , vol. 10(1), pages 21582440209, January.
    5. Denis Cormier & Daniel Coulombe & Luania Gomez Gutierrez & Bruce J. Mcconomy, 2018. "Firms in Transition: A Review of the Venture Capital, IPO, and M&A Literature," Accounting Perspectives, John Wiley & Sons, vol. 17(1), pages 9-88, March.

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