Family Control, Stock Price Levels, and Stock Split Activity

We investigate the impact of family control on both the share price level and the decision to split the firm?s stock. Low stock prices are associated with higher volatility and have been shown to attract more speculative trading, which may force managers to excessively focus on short-term earnings. Moreover, a reduction in the stock price level can hurt the firm?s reputational capital. We hypothesize that family owners, who are typically long-term investors and are especially concerned about corporate reputation, prefer to set higher stock prices to mitigate short-termism, focus on long-term planning, and reinforce the firm?s image. Using a comprehensive sample of firms in the Société des Bourses Françaises (SBF) 120 Index from 1998 to 2016, we find a positive correlation between share prices and family control. Our investigations also indicate that family firms are less likely to conduct price reductions through stock splits. These findings suggest that a high stock price is a distinctive feature of family firms and that family owners have a specific norm in mind with respect to prices.