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Founding family ownership, stock market returns, and agency problems

Author

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  • Nicolas Eugster

    (LEPA - Laboratoire d'Electrochimie Physique et Analytique - EPFL - Ecole Polytechnique Fédérale de Lausanne, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Dušan Isakov

Abstract

This paper explores the relationship between founding family ownership and stock market returns. Using the entire population of non-financial firms listed on the Swiss stock market for 2003–2013, we find that the stock returns of family firms are significantly higher than those of non-family firms after adjusting the returns for different firm characteristics and risk factors. Family firms generate an annual abnormal return of 2.8% to 7.1%. We also document that family firms potentially having more agency problems earn higher abnormal returns. Our evidence suggests that outside investors receive a premium for holding shares of these firms as they are exposed to the specific agency problems present in family firms.

Suggested Citation

  • Nicolas Eugster & Dušan Isakov, 2019. "Founding family ownership, stock market returns, and agency problems," Post-Print hal-02511063, HAL.
    • Handle: RePEc:hal:journl:hal-02511063
    DOI: 10.1016/j.jbankfin.2019.07.020
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    More about this item

    Keywords

    Family firm; Ownership structure; Abnormal returns; Performance; Earnings surprise;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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