Family firms, banks and firm value: Evidence from Malaysia

Abstract

PurposeThis paper examines the relationship between the number of domestic banks that the firm engages with and firm value and how this relationship is moderated by ownership concentration at low and very high level on a sample of Malaysian family and non-family firms.Design/methodology/approachFor hypotheses testing, panel data analysis using the fixed effects model (FEM) is used because the FEM can address any endogeneity problems effectively (Chi, 2005). The panel data regression is conducted on both family firms and non-family firms.FindingsWe find that there is a significant negative relationship between the number of domestic banks engaged by family firms, operating in industries where these firms do not have absolute monopoly, and firm value. However, there is no evidence that this significant negative firm value effect is stronger in family firms compared to non-family firms. Furthermore, the significant positive moderating effect of ownership concentration on this relationship within family firms in such industries is evident only at low level of ownership concentration. Interestingly, at very high level of ownership concentration, this significant positive moderating effect becomes negative. There is no evidence that these significant moderating effects are stronger in family firms compared to non-family firms.Research limitations/implicationsThis research has focused only on family and non-family firms.Practical implicationsAn implication of this research is that there is a need for the capital market regulators to introduce appropriate policies to deter family firms from having a close relationship with domestic banks as well as monitor the number of domestic banks engaged by such firms. There may be policy implications for consideration by the Central Bank of Malaysia as well.Originality/valueThis research provides some insights to both academia and industry regarding the consequences of domestic banking relationship and different levels of concentrated ownership in family firms in an emerging market. These insights can help improve the corporate governance as well as ownership structure of Malaysian public-listed family firms which dominate the capital market. Our findings refute the argument by Peng and Jiang (2010) by demonstrating that corporate reputational effects may be a substitute for institutional deficiencies.

Corporate governance and firm value: a study on European financial institutions

“…Previous research works have used various measures to evaluate the firm value. For example, some researchers used Tobin's Q as the ratio between the firm replacement value (represented by the sum of the firm market value and total debts) and the firm's total assets (Arouri et al , 2014; Enache and Hussainey, 2019; Haj Salem et al , 2020); others use the return on assets (ROA) and/or the return on equity (ROE) as financial accounting performance measures (Liew and Devi, 2020).…”

“…Finally, we took into account the activity sector of our sampled financial institutions. According to Liew and Devi (2020) and Abdi et al (2020), firm type is a significant variable as the firm value can be different depending on the type of industry. Thus, we expect that the activity sector will be positively associated with the firm value.…”

Assessing the AI-CRM technology capability for sustaining family businesses in times of crisis: the moderating role of strategic intent

“…They are particularly vulnerable because of their autonomy as well as their family-based standing (Lee, 2006). Several researchers (Runyan, 2006;Kraus et al, 2020;Kub ı cek et al, 2021;Liew and Devi, 2021) have observed that a crisis typically affects owners of family businesses twicefirst because they are private citizens and second because they are business owners (Nordqvist and Melin, 2010).…”

“…, 2020; Kubíček et al. , 2021; Liew and Devi, 2021) have observed that a crisis typically affects owners of family businesses twice – first because they are private citizens and second because they are business owners (Nordqvist and Melin, 2010).…”

Does Human Rights Disclosure Enhance Firm Value?

“…The dominant family company shows a higher company risk (Rajverma, 2019). This can lead to conflicts between majority and minority shareholders where family companies tend to ignore minority interests, thereby affecting firm value (Liew, 2020).…”