Are Founding Families Special Blockholders? - An Investigation of Controlling Shareholder Influence on Firm Performance

Abstract

This paper examines how family and non-family ownership affects the performance of Swiss listed firms from 2003 to 2010. We distinguish between these two types of controlling shareholders since they have different objectives. We hypothesise that only family shareholders have a real incentive to reduce agency costs whereas non-family blockholders are similar to widely held companies. Our results show that family firms are more profitable and sometimes display better market valuations as opposed to companies that are widely held or have a non-family blockholder. We investigate the impact of different features of family firms on performance, and document that the generation of the family, active involvement of the family and contestability of family control play an important role.JEL Classification: G3; G32

Factors Associated with Strategic Corporate Decisions in Family Firms: Evidence from Sweden

“…Our unbalanced panel dataset covers the period from 1998 through 2014. As is common in the literature, due to strong regulation in their industry, financial firms and firms whose headquarters are abroad are removed from the sample (e.g., Anderson and Reeb 2003a;Sraer and Thesmar 2007;Bach 2010;Isakov and Weisskopf 2014).…”

“…It is common in the literature to capture the controlling power of the owner. For example, there are proxies for family owners who are blockholders at 5% (Villalonga and Amit 2006;Nguyen 2011;Anderson et al 2012) and 20% (Cronqvist and Nilsson 2003;Sraer and Thesmar 2007;Isakov and Weisskopf 2014). To control for this, we also incorporate the controlling power of the family owners in our analyses by including the following ownership measures: (i) Vote is the percentage of the total votes held by the largest shareholder, and (ii) Capital is the percentage of the total cash flow rights held by the largest shareholder.…”

“…Risk aversion of family owners are well portrayed in the literature. Family owners have strong motives for the continuity of family business 1 International evidence on family firms is mainly from the US, Anderson and Reeb (2003a), Anderson et al (2012), Anderson and Reeb (2003b), Anderson et al (2009), Anderson et al (2003), Pérez-Gonzalez (2006), Villalonga and Amit (2006), Palia et al (2008), Li and Ryan Jr. (2015); from Sweden, Cronqvist and Nilsson (2003) and Heaney and Holmén (2008); from France, Sraer and Thesmar (2007) and Bach (2010); from Denmark, Bennedsen et al (2007); from Switzerland, Isakov and Weisskopf (2014); from Germany, Andres (2008); from Japan, Nguyen (2011); from Italy, Amore et al (2011); and from Colombia, Gonzalez et al (2013). Finally, Maury (2006) offers cross-country evidence.…”

Family Firms and Financial Analyst Activity

“…Data are available for 189 of them, but in several cases, no analysts followed the company during the period, so these firms are dropped 13 . After merging the data on analyst forecast with that 11 I am grateful to Isakov and Weisskopf (2014) for providing me with their data on the ownership structure of 185 Swiss firms between 2003 and 2010, which is the baseline of my database. 12 This is relatively uncommon.…”

“…Section 3 describes the data and variables used in the analysis. 4 Families in the U.S. hold an average stake of 17.88% of the voting rights in their company (Anderson and Reeb (2003)), whereas this percentage is 55% in Switzerland (Isakov and Weisskopf (2014)). -6 -Section 4 presents the descriptive statistics and results of univariate tests.…”