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1 – 10 of over 2000Mohammad Fuad, Vinod Thakur and Ashutosh Kumar Sinha
From the socioemotional wealth (SEW) perspective, family firms prioritize non-financial goals and show risk averse behaviour towards conducting acquisitions. In this paper, we…
Abstract
Purpose
From the socioemotional wealth (SEW) perspective, family firms prioritize non-financial goals and show risk averse behaviour towards conducting acquisitions. In this paper, we study family firms' acquisitive behaviour while participating in CBA waves. Scholars have largely treated the cross border acquisition (CBA) wave and non-wave environments as homogeneous. We theorize that these two environments differ in their uncertainty and risk profiles on account of temporal clustering of acquisition deals. Accordingly, based on the SEW perspective, we examine the preference of family firms to participate in CBA waves.
Design/methodology/approach
The paper is based on CBAs conducted by Indian family firms between 2000 and 2018. These waves are identified by conducting a simulation based methodology.
Findings
Our findings suggest that foreign institutional ownership, firm age and acquisition relatedness moderate the relationship between family control and participation in CBA waves.
Originality/value
Our paper contributes towards the acquisitive behavior of family firms and their participation in CBA waves.
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Julio Pindado and Chabela de la Torre
The aim of this paper is to analyse how financial decisions influence corporate ownership structure of Spanish family and non‐family controlled firms.
Abstract
Purpose
The aim of this paper is to analyse how financial decisions influence corporate ownership structure of Spanish family and non‐family controlled firms.
Design/methodology/approach
The authors derived two models in line with financial theory, which have then been estimated by using a sample of Spanish companies. Panel data methodology and estimation by the generalized method of moments allow the unobservable heterogeneity to be eliminated and the endogeneity problem controlled.
Findings
The main findings are as follows. First, increases in debt lead outside owners and managers to limit the risk they bear by reducing their holdings. Such reductions are also found in family controlled firms. Second, both outside owners and managers are encouraged to increase their stakes in the firm in view of higher dividends. This reaction is also observed in family controlled firms, and it is even stronger in the managers of family controlled firms. Third, outside owners in non‐family firms increase their holdings when a new investment project is undertaken, whereas the reaction of family controlled firms is the opposite. The expected positive effect of investment on insider ownership is only observed in family controlled firms.
Practical implications
When analysing the determinants of corporate ownership structure, the analysis should be controlled for family ownership.
Originality/value
Overall, this paper contributes to the strand of literature on the determinants of corporate ownership structure in two ways: first, by focusing on the role played by financial decisions; and second, by accounting for family control.
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Ayoib B. Che-Ahmad, Salau Olarinoye Abdulmalik and Nor Zalina Mohamad Yusof
The present study examines the effect of the chief executive officer (CEO) career horizon (CH) problem on earnings quality (ERN) for selected family-controlled firms known to have…
Abstract
Purpose
The present study examines the effect of the chief executive officer (CEO) career horizon (CH) problem on earnings quality (ERN) for selected family-controlled firms known to have a unique operational goal.
Design/methodology/approach
The generalised method of moment linear regression model was used on a sample of family-controlled firms in Malaysia from 2005 to 2016.
Findings
The study found a negative relationship between CH and ERN, measured by earnings persistence and earnings predictability. However, in the earnings predictability model, the reverse was found to be the case after interacting CH with CEO family affiliation, CEO experience and CEO equity. However, the use of a reputable auditor could not mitigate the CH problem. Also, the study obtained a closely related result in the earnings persistence model. The result aligns with the socio-emotional wealth (SEW) theory, which states that the goals of family-controlled firms go beyond financial objectives to include other non-financial objectives, and hence, their commitment to perpetuating their dynasty encourages them to preserve the quality of their earnings.
Originality/value
Existing studies on family firms and ERN have treated family firms as homogeneous entities by comparing family and non-family firms, using the underlying theoretical justification of the agency theory. However, this study departs from the agency theory, by considering those factors (i.e. the extent of CEO alignment with family owners and the choice of auditor), using the SEW theory, which establishes the differences among family firms. This work builds on that of Chen et al., (2018) and Ali and Zhang (2015), which suggested that corporate governance can mitigate the CH problem. Therefore, the strength of a CEO's attachment to the family firm (measured by CEO equity ownership and CEO affiliation to family members in family firms) and the choice of the auditor can explain the variation in the effect of the CH problem in family firms.
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Noor Afza Amran and Ayoib Che Ahmad
Most research concentrating on family and non‐family businesses with firm performance is conducted overseas with little research actually taking place in Malaysia. Thus, this…
Abstract
Most research concentrating on family and non‐family businesses with firm performance is conducted overseas with little research actually taking place in Malaysia. Thus, this study focuses on the relationship between family controlled businesses and corporate governance mechanisms with firm value among Malaysian companies. The sample size of this study is 896 companies that were listed on Bursa Malaysia from 2000 to 2003. The findings reveal that corporate governance mechanisms do have an influence on firm value in Malaysia. However, not all elements of governance mechanisms are significant, and the effects differ between family‐businesses and non‐family businesses. The results indicate as expected that board size and leadership structure affect the firm value for all companies. Further analysis shows that family businesses do practice separate leadership structure whilst board size contributes positively towards better performance in non‐family companies. More importantly, family and non‐family businesses are different in terms of corporate governance practices. Thus, regulators need to give additional attention to the unique setting of the family companies.
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Mauricio Jara-Bertin and Jean P. Sepulveda
The purpose of this paper is to introduce an earnings management dimension to compute pre-manipulated accounting performance (free of discretionary accruals) to determine whether…
Abstract
Purpose
The purpose of this paper is to introduce an earnings management dimension to compute pre-manipulated accounting performance (free of discretionary accruals) to determine whether family-controlled firms perform better than non-family-controlled firms.
Design/methodology/approach
The authors used Jones’ model (1991) to obtain a pre-manipulated performance measure for a sample of Chilean firms. The authors then regressed the pre-manipulated measures of accounting performance as dependent variables against the family nature of the largest shareholder using the Blundell and Bond generalized method of moments estimator.
Findings
The authors found that the pre-manipulated performance of family-controlled firms is superior to that of non-family-controlled firms. The authors also show that the presence of institutional investors in the firm’s ownership structure has a positive influence on the performance of family companies. The results suggest that earnings management behavior is not sufficient to explain the better performance of family-controlled firms that has been reported in the literature.
Originality/value
The authors provide new evidence regarding the real superior performance of family business. These results provide some degree of confidence to investors since family firms provide good quality earnings measures of financial performance.
Propósito
este estudio pretende determinar si las diferencias en performance entre empresas familiares y no familiares puede ser explicada por la existencia de manipulación contable de los retornos.
Diseño/metodología/enfoque
usamos el método de Jones (1991) para obtener una medida de retorno contable no manipulado para una muestra de empresas chilenas, y luego estimamos una regresión de tipo panel donde la medida de retorno sin manipular es la variable dependiente, la naturaleza familiar o no de la empresa es la variable independiente y una serie de variables de control. Debido a la posible endogeneidad entre retorno y tipo de empresa, usamos la técnica de Blundell y Bond (Método Generalizado de los Momentos).
Findings
encontramos que aun usando retornos libre de manipulación contable, las empresas familiares muestran un mejor desempeño que aquellas no familiares. Además, se observa que la presencia de inversionistas institucionales (AFPs) en la estructura de control de la firma, tiene un efecto positivo sobre el desempeño de las empresas familiares.
Originality/value
se presenta nueva evidencia que ratifica el mejor desempeño financiero de las empresas familiares. Además, mostramos, a diferencia de estudio previos, que la presencia de inversionistas institucionales explica parte del mejor desempeño financiero de dichas empresas. Lo anterior permite a inversionistas estar seguros que el mejor retorno de empresas familiares no se debe a la manipulación contable de las utilidades.
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This paper's aim is to examine whether board independence influences debt and dividend policies of family controlled firms.
Abstract
Purpose
This paper's aim is to examine whether board independence influences debt and dividend policies of family controlled firms.
Design/methodology/approach
The paper examines panel data on a sample of Australian publicly‐listed firms over the period 2000‐2005 using panel (random effects) regression.
Findings
Empirical test demonstrates that family controlled firms appear to have higher levels of leverage and dividend payout ratios than their non‐family counterparts. More importantly, the result indicates that the positive impact of family control on dividend policy is due to the higher proportion of independent directors on family boards. This underlines the significant role that independent directors play in influencing firm's dividend policies, especially for family controlled firms. The result also supports the notion that independent directors and dividends are complementary government mechanisms. This paper, however, finds little evidence that board independence moderates the relationship between family control and debt.
Research limitations/implications
While not all family firms are the same, this research treats them as a homogeneous grouping (i.e. firms are delineated into family versus non‐family). The fact that family firms are difficult to identify and define (reflected in the diversity of definitions in the literature) may also affect the validity of studies of family business. For policy makers, the finding could serve to justify initiatives to encourage more independent directors on boards, especially in family controlled firms.
Originality/value
This paper provides evidence about the relationship between board independence, dividends and debt from a country with higher levels of private benefits of control, strong legal shareholder protection but less significant role of external governance mechanisms compared to the USA.
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Salim Darmadi and Achmad Sodikin
The purpose of this paper is to investigate the influence of family control on the extent of voluntary disclosure in the annual report of Indonesian listed firms. Further, it…
Abstract
Purpose
The purpose of this paper is to investigate the influence of family control on the extent of voluntary disclosure in the annual report of Indonesian listed firms. Further, it seeks to investigate the role of corporate governance mechanisms in explaining the association between family control and voluntary disclosure. Governance mechanisms addressed here include board independence and institutional ownership.
Design/methodology/approach
This study employs a sample comprising non-financial firms on the Indonesia stock exchange that published the 2010 annual report. The voluntary disclosure index is computed for each sample firm, based on content analysis of the annual report. Cross-sectional regressions are performed to test research hypotheses.
Findings
Our evidence reveals that family control negatively and significantly influences the extent of information disclosure. This finding suggests that family-controlled firms have lower motivation to disclose additional voluntary information, which might unexpectedly expose private benefits maintained by the controlling family. We also find that the relationship between institutional ownership and disclosure is stronger in family firms. However, independent commissioners do not contribute to improving the extent of disclosure by family firms.
Originality/value
The present study contributes to the rare existing literature addressing the relation of family control to information disclosure. Further, the role of corporate governance mechanisms in promoting greater information transparency in family-controlled firms is still very rarely examined.
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Siti Sakinah Azizan and Rashid Ameer
The purpose of this paper is to investigate the impact of shareholder activism led by the Minority Shareholder Watchdog Group (MSWG) on the performance of family‐controlled firms…
Abstract
Purpose
The purpose of this paper is to investigate the impact of shareholder activism led by the Minority Shareholder Watchdog Group (MSWG) on the performance of family‐controlled firms in Malaysia from 2005 to 2009.
Design/methodology/approach
The paper uses event study methodology to calculate abnormal returns for the sample and control firms.
Findings
The paper finds significant positive cumulative abnormal returns of at least 0.5 percent for the targeted family firms, during the event window of [−1, 0] and [0, +1], as a result of MSWG engagement. There is a significant positive cumulative abnormal return of 1 percent for the firms where family control is less than the threshold level of 33 percent. It is interesting to note that MSWG engagements do not have consistent positive impact on the abnormal returns over the years. There are significant differences between the performance of MSWG targeted family‐controlled firms and non‐targeted family‐controlled firms after one year of MSWG intervention.
Research limitations/implications
The results show that MSWG‐led shareholder activism does have an effect on the share returns of the family‐controlled firms. These results imply that family‐controlled firms agree with the MSWG on those matters that improve the bottom‐line results.
Originality/value
The authors argue that this is the first study to examine MSWG engagements with family‐controlled firms in Malaysia.
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Erick Paulo Cesar Chang and Magdy Noguera
The purpose of this paper is to analyze how founders of family-controlled Real Estate Investment Trusts (REITs) under bounded rationality implement internal governance mechanisms…
Abstract
Purpose
The purpose of this paper is to analyze how founders of family-controlled Real Estate Investment Trusts (REITs) under bounded rationality implement internal governance mechanisms that may affect the long-term performance once the founder retires. These actions create a hurdle for successors to follow the founder’s success.
Design/methodology/approach
The authors collected data on secondary sources of 36 family and 22 professionally managed REITs from 1999 to 2012 that resulted in an unbalanced panel data of 726 REIT-year observations. The authors use a series of multi-variate analyses to test the hypotheses.
Findings
The findings confirm that founders of family-controlled REITs focus more on developing internal governance mechanisms to satisfy their personal goals. Long-term performance is negatively affected once the successor takes over especially when the successor is a family member.
Research limitations/implications
The authors have data limitations about family involvement. The authors suggest future avenues of investigation such as combining perceptual with archival data.
Practical implications
The authors expect that REIT managers and families can use the findings to develop viable and sustainable governance practices. Especially, being a publicly traded REIT implies to conform to the market expectations so there is a need to balance socio emotional wealth preservation with financial goals.
Originality/value
The authors frame the paper on transaction cost economics and contribute to the literature by stating that the dominance of founders of family-controlled REITs are more aligned to keep the business under family control once the founder retires.
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Joaquín Monreal-Pérez and Gregorio Sánchez-Marín
The purpose of this paper is to study the internationalization of family firms, exploring specifically if the transition from family control to non-family control (losing family…
Abstract
Purpose
The purpose of this paper is to study the internationalization of family firms, exploring specifically if the transition from family control to non-family control (losing family managerial influence) affects a firm’s export activity.
Design/methodology/approach
Based on panel data for Spanish firms from 2006 to 2012, a random effect tobit and probit regression and a propensity score matching were run on a sample of 225 firms moving from family to non-family control (switchers) matched with 4,213 firms remaining under family control (non-switchers).
Findings
Although from a static viewpoint family controlled firms export less than their non-family counterparts, from a dynamic perspective family firms remaining under family control (non-switchers) are associated with a fall in export activity in comparison with family firms transitioning to non-family control (switchers). Both findings are related back to the socioemotional wealth (SEW) perspective.
Research limitations/implications
The findings of this study shed light on the trade-offs that family firms experience in order to balance their desire to increase their internationalization (and the risk associated with it) and their wish to maintain SEW.
Practical implications
The findings should encourage family owners and managers to take long-term strategic decisions leading to internationalization which, although risky, will prevent subsequent loss of SEW in terms of family control.
Originality/value
This work provides evidence concerning family firms’ willingness to undertake risky activities, such as internationalization, considering the threats to their wealth.
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