Search results

The agency problem inherent in governing public corporations predicts a management not acting in shareholders’ best interest. The purpose of this paper is to use the Green Bay Packers’ unique ownership structure as a case study to show that a disperse shareholder base does not necessarily lead to failures in corporate governance.

The Packers have been run by a great management team since 1992. The authors argue that the new management has become the de facto owners of the Packers organization and dealt away the agency costs as a result. This argument is in line with the Coase Theorem.

The ownership of the Packers is a property. As would be argued with the Coase Theorem, if the property right is well defined, who controls the property, under certain circumstances, is irrelevant in regard of maximizing ownership value.

With only one sample point, the authors, however, cannot rule out the randomness of the Packers’ stellar performance and also the possibility that the new management acts in the best interest of Packers shareholders because they have well-designed employment contracts.

Nevertheless, the findings offer a new perspective to the corporate governance literature.

This paper seeks to analyze the family firm's capital structure decisions, focusing on the speed of adjustment (SOA) as well as on the effect of distance from the target capital structure on the SOA towards target short-term and long-term debt ratios in unlisted small and medium-sized family firms.

Methodologically, we use dynamic panel data estimators to estimate the effects of distance on the speeds of adjustment towards those targets. Data for the period 2006–2014 were collected for two research sub-samples: one sub-sample with 398 family firms; the other sub-sample contains 217 non-family firms.

The results show that the deviation from the target debt ratios impacts negatively on the speeds of adjustment towards target short-term and long-term debt ratios in unlisted family firms. These results suggest that family firms, deviating from target debt ratios, face deviation costs, i.e. insolvency costs, inferior to the adjustment costs, i.e. transaction costs. Therefore, family firms stay away from the target debt ratios for a long time than do non-family firms.

The research sample comprises a low number of family firms, therefore for future research we suggest increasing the size of the sample of family firms to get a deeper understanding of family firms' SOA towards capital structure. Additionally, we suggest the analysis of other potential determinants of the speed of adjustment towards target capital structure.

The results obtained suggest that the distance from the target short-term and long-term debt ratios can be avoided if these firms do not depend almost exclusively on internal finance to adjust towards target capital structure. Moreover, for policymakers, we suggest the creation/promotion of alternative external finance sources, allowing reduced transaction costs that contribute to a faster adjustment of small family firms towards target capital structure.

The most previous research focusing on capital structure decisions have focused on listed family firms. To fill this gap, this study examines the speed of adjustment towards target debt ratios in the context of unlisted family firms. Moreover, transaction costs are a function of debt maturity, therefore this study examines separately the speeds of adjustment towards target short-term and long-term debt ratios. This paper shows that the adjustment costs (i.e. transaction costs) could hold back family firms from rebalancing its capital structure.