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Mixing Family With Business: A Study of Thai Business Groups and the Families Behind Them

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  • Marianne Bertrand
  • Simon Johnson
  • Krislert Samphantharak
  • Antoinette Schoar

Abstract

Families run a large fraction of business groups around the world. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of family trees and business groups for nearly 100 of the largest business families in Thailand. We find a strong positive association between family size and family involvement in the ownership and control of the family business. The sons of the founders play a central role in both ownership and board membership, especially when the founder of the group is gone. The availability of more sons is also associated with lower firm-level performance, especially when the founder is no longer present. We identify a possible governance channel for this performance effect. Excess control by sons, but not other family members, is associated with lower firm performance. In addition, excess control by sons increases with the number of sons and with the death of the founder. One hypothesis that emerges from our analysis is that part of the decay of family-run groups over time may be due to a dilution of ownership and control across a set of equally powerful descendants of the founder, which creates a race to the bottom in tunneling resources out of the group firms.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13738.

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Date of creation: Jan 2008
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Publication status: published as Bertrand, Marianne & Johnson, Simon & Samphantharak, Krislert & Schoar, Antoinette, 2008. "Mixing family with business: A study of Thai business groups and the families behind them," Journal of Financial Economics, Elsevier, vol. 88(3), pages 466-498, June.
Handle: RePEc:nbr:nberwo:13738

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  1. Marianne Bertrand & Antoinette Schoar, 2006. "The Role of Family in Family Firms," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 73-96, Spring.
  2. Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2202, October.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998. "Corporate Ownership Around the World," NBER Working Papers 6625, National Bureau of Economic Research, Inc.
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  5. Randall K. Morck, 2000. "Concentrated Corporate Ownership," NBER Books, National Bureau of Economic Research, Inc, number morc00-1.
  6. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
  7. Bhattacharya, Utpal & Ravikumar, B, 2001. "Capital Markets and the Evolution of Family Businesses," The Journal of Business, University of Chicago Press, vol. 74(2), pages 187-219, April.
  8. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(04), pages 695-719, December.
  9. Francisco Pérez-González, 2006. "Inherited Control and Firm Performance," American Economic Review, American Economic Association, vol. 96(5), pages 1559-1588, December.
  10. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2000. "Ferreting Out Tunneling: An Application to Indian Business Groups," NBER Working Papers 7952, National Bureau of Economic Research, Inc.
  11. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
  12. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, 06.
  13. Morten Bennedsen & Kasper Meisner Nielsen & Francisco Pérez-González & Daniel Wolfenzon, 2007. "Inside the Family Firm: the Role of Families in Succession Decisions and Performance," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 647-691, 05.
  14. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
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