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Family Ownership and Return on Investments – Founders, Heirs and External Managers

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  • Johanna Palmberg

    ()

  • Johan Eklund

    ()

  • Daniel Wiberg

Abstract

This paper investigates how family ownership, control and management affect firm investment performance. We use the identity of the CEO and the COB to establish under what management the firm is: founder, descendent or external management. The analysis shows that founder management has no effect on investment performance in family firms, whereas descendant management has a negative impact on firm performance and having external hired managers significantly improves investment performance. Moreover, we examine the effects of dual-class shares; we find that the separation of voting right from cash-flow right has a negative impact on performance in both family and non-family firms, but the negative effect is larger in family firms.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa10p1517.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa10p1517

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  1. Andrei Shleifer & Fausto Panunzi & Mike Burkart, 2002. "Family Firms," FMG Discussion Papers, Financial Markets Group dp406, Financial Markets Group.
  2. Paul A. Gompers & Joy Ishii & Andrew Metrick, 2004. "Incentives vs. Control: An Analysis of U.S. Dual-Class Companies," NBER Working Papers 10240, National Bureau of Economic Research, Inc.
  3. Gugler, Klaus & Yurtoglu, Burcin B., 2003. "Average q, marginal q, and the relation between ownership and performance," Economics Letters, Elsevier, Elsevier, vol. 78(3), pages 379-384, March.
  4. 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.
  5. Marianne Bertrand & Antoinette Schoar, 2006. "The Role of Family in Family Firms," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(2), pages 73-96, Spring.
  6. Miller, Danny & Le Breton-Miller, Isabelle & Lester, Richard H. & Cannella Jr., Albert A., 2007. "Are family firms really superior performers?," Journal of Corporate Finance, Elsevier, Elsevier, vol. 13(5), pages 829-858, December.
  7. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages 461-88, June.
  8. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1741, Harvard - Institute of Economic Research.
  9. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu, 2004. "Corporate Governance and Globalization," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(1), pages 129-156, Spring.
  10. Villalonga, Belen & Amit, Raphael, 2006. "How do family ownership, control and management affect firm value?," Journal of Financial Economics, Elsevier, Elsevier, vol. 80(2), pages 385-417, May.
  11. 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, American Finance Association, vol. 57(6), pages 2741-2771, December.
  12. Bjuggren, Per-Olof & Eklund, Johan & Wiberg, Daniel, 2005. "Ownership Structure, Control and Firm Performance: The Effects of Vote Differentiated Shares," Ratio Working Papers, The Ratio Institute 71, The Ratio Institute.
  13. Roberto Barontini & Lorenzo Caprio, 2006. "The Effect of Family Control on Firm Value and Performance: Evidence from Continental Europe," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 12(5), pages 689-723.
  14. Andres, Christian, 2008. "Large shareholders and firm performance--An empirical examination of founding-family ownership," Journal of Corporate Finance, Elsevier, Elsevier, vol. 14(4), pages 431-445, September.
  15. Hagelin, Niclas & Holmen, Martin & Pramborg, Bengt, 2006. "Family ownership, dual-class shares, and risk management," Global Finance Journal, Elsevier, vol. 16(3), pages 283-301, March.
  16. Anderson, Ronald C & Reeb, David M, 2003. "Founding-Family Ownership, Corporate Diversification, and Firm Leverage," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 46(2), pages 653-84, October.
  17. Gugler, Klaus & Mueller, Dennis C & Yurtoglu, B Burcin, 2004. "Corporate Governance and the Returns on Investment," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 47(2), pages 589-633, October.
  18. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 38(04), pages 695-719, December.
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