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Protected by the family ? : How closely held family firms protect minority shareholders

Author

Listed:
  • de Holan Pablo Martin

    (EM - EMLyon Business School)

  • Luis J. Sanz

Abstract

Most companies in the world are family-owned, and a majority of them operate in countries where the legal protection of minority shareholders is weak at best. In spite of previous arguments to the contrary, research shows that agency problems among owners actually increase in family ownership situations, so family control by itself may not be an efficient substitute for the legal protection of minority investors. In this article we analyze successful strategies used by non-US business groups and firms to increase the satisfaction of their minority shareholders and to limit the incentives of the controlling shareholders to abuse them, and predict the outcomes of that protection. From these experiences we are able to suggest conditions needed to link family control and minority shareholder protection.

Suggested Citation

  • de Holan Pablo Martin & Luis J. Sanz, 2006. "Protected by the family ? : How closely held family firms protect minority shareholders," Post-Print hal-02312931, HAL.
    • Handle: RePEc:hal:journl:hal-02312931
    as

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    Citations

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    Cited by:

    1. Rohana OTHMAN & Zubaidah ZAINAL ABIDIN & Nagathretnam THIRUMANICKAM, 2013. "Directors? View on Exemption from Statutory Audit," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(10), pages 1277-1290, October.
    2. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2012. "Family involvement and dividend policy in listed and non-listed firms," Galeras. Working Papers Series 034, Universidad de Los Andes. Facultad de Administración. School of Management.
    3. Isabel-María García-Sánchez & Lázaro Rodríguez-Ariza & María-del-Carmen Granada-Abarzuza, 2021. "The Influence of Female Directors and Institutional Pressures on Corporate Social Responsibility in Family Firms in Latin America," JRFM, MDPI, vol. 14(1), pages 1-20, January.
    4. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2013. "Corporate governance mechanisms in family firms: Evidence from CEO turnovers," Galeras. Working Papers Series 037, Universidad de Los Andes. Facultad de Administración. School of Management.
    5. Waseemullah & Arshad Hasan, 2018. "Business Group Affiliation and Firm Performance—Evidence from Pakistani Listed Firms," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(3), pages 351-371.
    6. M. Akbar, 2008. "Do the Governance, Strategic and Organisational Practices Differ in Indian Family and Professionally Managed Firms?," Vision, , vol. 12(3), pages 15-30, July.
    7. George, Rejie & Kabir, Rezaul, 2008. "Business groups and profit redistribution: A boon or bane for firms?," Journal of Business Research, Elsevier, vol. 61(9), pages 1004-1014, September.
    8. Poletti-Hughes, Jannine & Williams, Jonathan, 2019. "The effect of family control on value and risk-taking in Mexico: A socioemotional wealth approach," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 369-381.
    9. Binz Astrachan, Claudia & Astrachan, Joseph H. & Kotlar, Josip & Michiels, Anneleen, 2021. "Addressing the theory-practice divide in family business research: The case of shareholder agreements," Journal of Family Business Strategy, Elsevier, vol. 12(1).
    10. Dinesh Jaisinghani, 2016. "Group affiliation, R%D and firm performance: empirical evidence from Indian manufacturing sector," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 8(1), pages 30-48.
    11. Singh, Manohar & Nejadmalayeri, Ali & Mathur, Ike, 2007. "Performance impact of business group affiliation: An analysis of the diversification-performance link in a developing economy," Journal of Business Research, Elsevier, vol. 60(4), pages 339-347, April.

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