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Are founding families special blockholders? An investigation of controlling shareholder influence on firm performance

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  • Isakov, Dušan
  • Weisskopf, Jean-Philippe

Abstract

This paper examines how family and non-family ownership affects the performance of Swiss listed firms from 2003 to 2010. We distinguish between these two types of controlling shareholders since they have different objectives. We hypothesise that only family shareholders have a real incentive to reduce agency costs whereas non-family blockholders are similar to widely held companies. Our results show that family firms are more profitable than companies that are widely held or have a non-family blockholder. For market valuations we find that the family stake plays a critical role and document a concave relationship between family ownership and Tobin’s Q. We also investigate the impact of different features of family firms on performance, and document that the generation of the family and the active involvement of the family play an important role for market valuation.

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  • Isakov, Dušan & Weisskopf, Jean-Philippe, 2014. "Are founding families special blockholders? An investigation of controlling shareholder influence on firm performance," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 1-16.
  • Handle: RePEc:eee:jbfina:v:41:y:2014:i:c:p:1-16 DOI: 10.1016/j.jbankfin.2013.12.012
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    Cited by:

    1. Eduardo L. Giménez & José Antonio Novo, 2015. "Family Firm Succession," Documentos de trabajo - Analise Economica 0058, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    2. Hamadi, Malika & Heinen, Andréas, 2015. "Firm performance when ownership is very concentrated: Evidence from a semiparametric panel," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 172-194.
    3. Gilson, Ronald J. & Schwartz, Alan, 2015. "Corporate control and credible commitment," International Review of Law and Economics, Elsevier, vol. 43(C), pages 119-130.
    4. Lin, Yi-Mien & Shen, Cheng-An, 2015. "Family firms' credit rating, idiosyncratic risk, and earnings management," Journal of Business Research, Elsevier, vol. 68(4), pages 872-877.
    5. Isakov, Dušan & Weisskopf, Jean-Philippe, 2015. "Pay-out policies in founding family firms," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 330-344.
    6. Eugster, Nicolas, 2017. "Family firms and financial analyst activity," FSES Working Papers 491, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    7. Díaz-Díaz, Nieves Lidia & García-Teruel, Pedro J. & Martínez-Solano, Pedro, 2016. "Debt maturity structure in private firms: Does the family control matter?," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 393-411.
    8. Eugster, Nicolas & Isakov, Dusan, 2017. "Founding family ownership,stock market returns, and agency problems," FSES Working Papers 490, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    9. Jameson, Melvin & Prevost, Andrew & Puthenpurackal, John, 2014. "Controlling shareholders, board structure, and firm performance: Evidence from India," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 1-20.
    10. Mauricio Jara-Bertin & Jean P. Sepulveda, 2014. "Earnings Management and Performance in Family-Controlled Firms:Evidence from an Emerging Economy," Serie Working Papers 01, Universidad del Desarrollo, School of Business and Economics, revised Nov 2014.

    More about this item

    Keywords

    Founding family firm; Active management; Founder; Ownership structure; Firm performance;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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