A Rose by Any Other Name: Are Family Firms Named After Their Founding Families Rewarded More for Their New Product Introductions?

The authors explore the relation between the way different family firms are named, and the shareholder value impact of these firms’ new product introductions. Using an event study of 1,294 product introduction announcements of 107 publicly listed U.S. family firms, the authors find that the presence of the founding family’s name as part of a family firm’s name acts as a valuable firm resource, increasing the abnormal stock returns surrounding the firm’s new product introductions. Superior returns to family-named firms’ new product introductions are partially mediated by these firms’ history of ethical product-related behavior: family-named firms, particularly those with corporate branding, and those wherein a founding family member holds the CEO or chairman position, are more likely to exhibit a history of avoiding such product-related controversies as product safety issues, and deceptive advertising. The authors highlight the managerial and theoretical contributions of this research.     

Founding Family Firms,CEO Incentive Pay,and Dual Agency Problems

This paper contributes to the literature on agency theory by examining relations between family involvement and CEO compensation. Using a panel of 362 small U.S. listed firms, we analyze how founding families influence firm performance through option portfolio price sensitivity. Consistent with the dual agency framework, we find that family firms have lower CEO incentive pay, which is further reduced by higher executive ownership. Interestingly, such incentive pay offsets the positive impact that families have on firm valuation. Collectively, our results show that, compared with nonfamily firms, lower incentive pay adopted by family firms due to lower agency costs mitigates the direct effect of family involvement on firm performance. Once accounting for CEO incentive pay, we do not observe performance differences between family and nonfamily firms.     

Inherited corporate control and returns on investment

This paper contributes to the literature on management in family firms by investigating how succession in family firms affects returns on investment. The identities of the chief executive officer (CEO) and the chairman of the board (COB) were used to establish whether the management of the firm can be characterized as founder, descendant, or external management. A unique, unbalanced panel data set on listed Swedish firms covering the period from 1990 to 2005 was used in the analysis. The results show that founder management has a positive effect on the returns on investment in family firms, whereas descendant management has a negative impact. An external CEO as a successor in family firms leads to more efficient investment policies with increased firm value as a result. That is, when studying corporate governance in family firms it is important to account for what type of management the firm has. Further studies are required to understand the relationship between ownership, control, management, and firm performance.     

Family Control,Socioemotional Wealth and Earnings Management in Publicly Traded Firms

We examine the unique nature of agency problems within publicly traded family firms by investigating the earnings management decision of dominant family owners relative to non-family. To do so, we draw upon literature demonstrating that family owners are loss averse with respect to the family’s socioemotional wealth, or the affective endowment derived from firm ownership and control. Our theory and findings suggest that potential reputational consequences of earnings management lead family principals to engage in less of this practice relative to non-family firms, and that founder family firms are less likely than non-founder family firms to use earnings management. Moreover, the family-firm effect varies with the firm size, the degree of CEO entrenchment, and the firm’s stock structure. We provide important insights regarding differences between family and non-family principals in the use of unethical accounting practices, thereby extending agency theory and advancing an underdeveloped research area.     

Resources of the firm, Russian high-technology startups, and firm growth

Russia possessed many world-class technologies prior to the break up of the Soviet Union. Entrepreneurial endeavors resulted from this technological ability as market forces encouraged individuals to leave the large state enterprises that produced those technologies. Founding characteristics of the firm impact the resources that are available to the startup firm. This study investigates the extent to which founding factors in Russia help high-technology firms to prosper. It was found that the team establishing the business mitigated the liability of newness. However, in contrast to the US, the culture of Russia does not produce negative results if the founding team grows very large. Additionally, it was shown that firms that pursued more technological products and enter the market later performed best.     

The characteristics of family firms: exploiting information on ownership,kinship, and governance using total population data

Family firms are often considered characteristically different from non-family firms. However, our understanding of family firms suffers from an inability to identify them in total population data; information is rarely available regarding owners, their kinship, and their involvement in firm governance. We present a method for identifying domiciled family firms using register data; this method offers greater accuracy than previous methods. We apply this method to Swedish data concerning firm ownership, governance, and kinship from 2004 to 2010. We find that the family firm is a significant organizational form, contributing over one third of all employment and gross domestic product (GDP). Family firms are common in most industries and range in size. Furthermore, we find that, compared to private non-family firms, family firms have fewer total assets, employment, and sales and carry higher solidity, although family firms are more profitable. These differences diminish with firm size. We conclude that the term “family firm” includes a large variety of firms, and we call for increased attention to their heterogeneity.     

Does the Type of Family Control Affect the Relationship Between Ownership Structure and Firm Value?

Our objective is to disentangle which family business characteristics enable family ownership to be an effective corporate governance mechanism. To this aim, we investigate whether the relationship between ownership concentration and firm value is moderated by the type of family influence. This study shows that family control positively affects performance, primarily when family members serve on the board and when the founder is still influential. Our findings hold when we control for the general blockholder effect and they are robust to a battery of tests. We conclude that the impact of ownership concentration on firm value differs across family firms.     

Ties that Bind? A Mediation Analysis Exploring Contract Use in Family versus Nonfamily Firms

Based on the assumptions of agency theory, family business researchers have often argued that family firms are less likely to use formal methods of monitoring and control than nonfamily firms. We explore the relationship between family firm status and presence of a written agreement among the owners, a formal measure of control. We hypothesize economic goals and perceived level of risk taking and management efficacy will mediate the relationship between family firm status and presence of a written agreement. Results indicate that the primary goal of the firm serves as a partial mediator of this relationship.     

Does corporate diversification create value in emerging markets? New evidence from Chile

Using a sample of 85 Chilean firms listed in the Santiago Stock Exchange from 2005 to 2013, we analyze the impact of corporate diversification on firm value. We consider voting rights of the main shareholder and institutional investors’ influence on firm value. We report firm‐value destruction for diversified firms. Regarding ownership concentration, we report a negative relation between the largest shareholder ownership and firm value. Separation between voting rights and cash flows rights of this shareholder is negatively related to firm value. While Pension Fund Administrators (AFP) mitigate firm value destruction in diversified firms, other institutional investors do not play an active role in controlling value destruction. Finally, if the largest owner is a family, we report firm‐value creation in diversified firms. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

企业价值、盈利性与成长:中国上市公司控制类型的比较研究

本文以我国上市公司为例,对不同控制类型下企业价值、盈利性与成长进行了比较研究,试图发现控制类型对企业所追求的目标是否产生影响。研究结果表明,在不同的控制类型下,企业价值、盈利性与成长存在一定的差异。与国外业主控制型相似的法人控股的企业注重企业价值和成长性,而与经理控制型相似的国有绝对控股企业相对更加重视盈利性,这可能是不同的控制主体持股的目标不同所导致的。     

Family Control,Socioemotional Wealth,and Governance Environment: The Case of Bribes

This study examines the relationship between family control and young entrepreneurial firm’s bribing behavior around the globe. Relying on over 2,000 young firms from the World Bank Environment Survey, we find that family control helps to reduce a firm’s bribery behavior, but further investigation shows that this effect only exists in countries with weaker macro-governance environment. In countries with more established and transparent governance mechanism, family control does not seem to make any difference. We interpret our findings as the business family’s preservation of socioemotional wealth.     

Family control,accounting misstatements,and market reactions to restatements: Evidence from China

We examine the impact of family control on the likelihood of accounting misstatements and on market reactions to subsequent restatements. Using a matched-firm approach, we find that family control overall reduces the incidence of misstatements, consistent with the notion that controlling families have a greater concern for reputation than nonfamily blockholders. However, compared to nonfamily firm restatements, restatements announced by family-controlled firms trigger significantly more negative market reactions. We attribute the more negative market reactions to the greater loss in reputation and higher investor scepticism of the credibility of corporate insiders for family firms than for nonfamily firms following restatements.     

The value of family control during political uncertainty: Evidence from Thailand's constitutional change in 2014

We examine the effect of family control on firm value and corporate decision during Thailand's constitutional change arising from the 2014 coup d'état. We find that Thai family firms perform poorly when compared to non-family firms during the period of political uncertainty. The effect is more pronounced when firms have high expected agency costs from outside investors. Further, we find that family firms delay their investments, hold less cash, pay smaller dividends and have poorer access to debt financing sources relative to non-family firms. The reductions in investment and financing activities may at least partially account for their underperformance. Our evidence is consistent with the view that family control enhances firms' survivorship by establishing political connections in times of political uncertainty at the expense of minority shareholders.     

家族涉入、网络结构与家族企业的网络交易成本

文章利用浙江和重庆两地制造业家族企业的调查数据,实证检验了家族涉入对家族企业降低网络交易成本的影响及网络结构的中介效应,研究结果表明：（1）家族所有权、家族承诺对家族企业降低网络交易成本有显著的正向影响,领导企业的家族代数对家族企业降低网络交易成本有显著的负向影响;（2）网络中心度和密度在家族承诺与降低网络交易成本之间起部分中介作用。本文的研究结论对于提高我国家族企业网络组织效率具有一定的现实意义。     

A taxonomy of small- and medium-sized international family firms

This study develops a taxonomy of small- and medium-sized family firms that internationalise and discusses the different configurations of these firms based on firm culture (in terms of organisational orientations), firm strategy (in terms of differentiation, cost leadership and marketing standardisation) and firm structure (in terms of integration, centralisation and specialisation). Although the literature on international family firms has highlighted the significant role of organisational culture in firm internationalisation, the strategies and structures of international family firms and their consequences for performance have been disregarded. To examine the interplay of international family firm culture, strategy and structure, we employ a quantitative taxonomic approach that is rooted in configurational theory, analysing 504 Germany-based small- and medium-sized family firms. Different combinations of strategy, structure and culture result in different configurations of family firms and different levels of non-domestic performance. In considering these configurations, we aim to determine which combinations of strategies, structures and firm orientations are primarily applied by international family firms and whether these organisational configurations are successful. Our empirical findings suggest that there are four groups of firms: Domestic-Focussed Traditionalists, Global Standardisers, Multinational Adapters and Transnational Entrepreneurs. These configurations are clearly distinctive in terms of their structure, orientations and performance but differ less in terms of their strategies. Superior international (i.e. non-domestic) performance tends to be driven by a decentralised entrepreneurial approach.     

Owner as Manager,Extended Horizons and the Family Firm

Previous work on firm ownership structure suggests that organizations in which ownership and control are combined may be undervalued relative to the market investment rule because decision makers have an incentive to forgo investment projects that managers in firms with specialized ownership find profitable. However, the specialization of ownership and decision-making functions may result in substantial agency costs. This paper shows that these tradeoffs may not exist in family firms. The extended horizons characteristic of family businesses may provide the necessary incentives for decision makers to invest according to the market rule while limiting agency costs that arise when ownership and control are separated. Family ties, loyalty, insurance, and stability are expected to be effective in lengthening the horizons of managers and in providing the incentives for family managers to make efficient investments in the family business.     

Is blood always thicker than water? Family firm parents,kinship ties,and the survival of spawns

We theorize that due to their ability to draw upon the distinctive bonding and bridging social capital resources of their family firm parents, family member spawns have longer early survival times than nonfamily member spawns from family firms, which in turn should have longer early survival times than spawns from nonfamily firm parents. We also predict that the survival enhancing effects of family parent bonding and bridging social capital are conditional on the spatial, cognitive and social proximity between the parent and the spawn. Using a population wide sample of 114,837 spawns founded in Sweden between 2000 and 2007, we find that nonfamily member spawns survive longer than spawns from nonfamily firms, and that this survival enhancing effect is contingent on the spatial and social proximity between the spawn and its parent. We also find that spawns founded by family members, on average, do not survive longer than spawns from family firms founded by nonfamily members, and that greater spatial and cognitive distance even hurt the survival of family member spawns. We discuss the contributions of our research to the spawning, family firm, and entrepreneurship literatures.     

Family firms and financial performance: The cost of growing

This study examines the relationship between financial performance and family involvement for 523 listed and non-listed Colombian firms over 1996–2006. Using a detailed database and performing several panel data regression models, we find that family firms exhibit better financial performance on average than non-family firms when the founder is still involved in operations, although this effect decreases with firm size. With heirs in charge, there is no statistical difference in financial performance. Both direct and indirect ownership (control through pyramidal ownership structures within family business groups) affect firms' financial performance positively. However, this positive effect decreases with firm size. The results suggest that some kinds of family involvement appear to make firm growth expensive.     

The value impact of international and industrial diversifications on public‐listed firms in Malaysia

This study examines the relationship between firm value and both international and industrial diversification involvements for a sample of 267 listed firms in Malaysia over 2001–2009. We find no evidence that international diversification has any significant impact on the firm value but industry diversification locally slightly increases firm value, even after controlling for the degree of ownership concentration. Our research further indicates that without any diversification involvement, family ownership presents lower value than foreign and government ownerships; and with industrial diversification family ownership presents significant higher value than foreign and government ownerships.     

Small Firm Behaviour in Sri Lanka

This paper investigates the behaviour of small firms in Sri Lanka using a countrywide cross-sectional survey. The 73 responding firms provide information on whether certain variables: the firm's utilisation of assets; labour; technology; family savings; and access to bank financing, vary with four firm-specific factors: industry; family ownership; size; and whether the firm's manager was also an owner of the firm. Sampled small firms are mostly family owned and owner managed although a significant number of family owned firms are managed by non-family managers. Most firm's under-utilise assets, use existing rather than the latest technology, and are reliant upon family savings. Statistical analysis provides evidence of significant cross-sectional variation in small firm practice. The results are explained in terms of the cost of acquiring new technology, asymmetries and opacity in financial information, and the non-value maximising behaviour of firm owners who are also firm managers.