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Book part
Publication date: 4 December 2012

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Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Content available
Book part
Publication date: 4 December 2012

Abstract

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Open Access
Article
Publication date: 28 February 2022

Carlotta D'Este and Marina Carabelli

This study aims to investigate the relationship between family managers and firms’ risk levels in a context characterized by low investor protection and firm opacity…

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Abstract

Purpose

This study aims to investigate the relationship between family managers and firms’ risk levels in a context characterized by low investor protection and firm opacity. Specifically, this paper examines whether the level of risk faced by firms is affected by family shareholders’ ownership stake and activism.

Design/methodology/approach

Corporate governance data were hand-collected for a sample of 90 Italian listed companies and 540 observations from the year 2018. Regression analysis was then used to test the research hypotheses.

Findings

This study provides evidence of a positive association between active family ownership and risk faced by sampled firms. This study also finds that the number of inside directors is negatively correlated with firms’ risk-taking. Overall, the results confirm family managers’ influence on firms’ risk choices and show consistency with theoretical arguments in favor of hiring professional managers to guide family-owned firms.

Practical implications

Practical implications emerge from the study findings. First, family owners should consider to hire a larger number of professional managers to support firms’ wealth maximization and retention and to reduce default risks. Second, investors should take into account the firms’ board of directors and management composition to better assess the investments risk level. Finally, the positive correlation between active family owners and systematic risk suggests the opportunity for regulators to improve the legal requirements related to minority directors to increase their effectiveness and, therefore, minority shareholders’ protection.

Originality/value

This study extends the literature on the association between ownership structure and firms’ risk levels, showing the effect of family managers on firms’ risk levels. Besides, to the best of the authors’ knowledge, no previous study investigates professional executives’ influence on risk when family ownership prevails.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 6
Type: Research Article
ISSN: 1472-0701

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