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Family management: creating or destroying firm value?

Author

Listed:
  • Cristiano M. Costa

    () (Universidade do Vale do Rio dos Sinos)

  • Fernando Caio Galdi

    () (Fucape Business School)

  • Fabio Y. S. Motoki

    () (Universidade Federal do Espírito Santo)

Abstract

This research explores whether management by family members creates or destroys firm value. We estimate the impact of family pervasiveness in top management (family members as executive officers or board members) on firm value as measured by Tobin's Q. Results indicate that family members acting as executive officers decreases firm value. More, this effect is exacerbated when the family relationships are farther away, i.e., second-degree vs. first-degree or in-law vs. same-kin relationships. We contribute to the literature in the Brazilian context, in which the influence of family management on firm value remains largely unexplored. We also propose a new way of measuring family management pervasiveness that takes into account the closeness of relationships, thus controlling for the costs and benefits of altruistic acts within the family.

Suggested Citation

  • Cristiano M. Costa & Fernando Caio Galdi & Fabio Y. S. Motoki, 2014. "Family management: creating or destroying firm value?," Economics Bulletin, AccessEcon, vol. 34(4), pages 2292-2302.
  • Handle: RePEc:ebl:ecbull:eb-14-00754
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    family management; firm value; relatives' distance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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