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Founding family ownership,stock market returns, and agency problems

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  • Eugster, Nicolas
  • Isakov, Dusan

Abstract

This paper explores the relationship between founding family ownership and stock market returns. Using the entire population of non-financial firms listed on the Swiss stock market for 2003–2013, we find that the stock returns of family firms are significantly higher than those of non-family firms after adjusting the returns for different risk factors and firm characteristics. Family firms generate an annual abnormal return of 2.8% to 7.1%. Moreover, family firms potentially having more agency problems earn higher abnormal returns than other firms and markets participants are regularly positively surprised by the economic outcomes produced by these firms around earnings announcements. The evidence suggests that outside investors earn a premium for bearing the high expropriation risk of family firms.

Suggested Citation

  • 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.
  • Handle: RePEc:fri:fribow:fribow00490
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    References listed on IDEAS

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    Cited by:

    1. Martin Huber & Yu‐Chin Hsu & Ying‐Ying Lee & Layal Lettry, 2020. "Direct and indirect effects of continuous treatments based on generalized propensity score weighting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(7), pages 814-840, November.

    More about this item

    Keywords

    Family firm; ownership structure; earnings surprise; market efficiency;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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