The Contest to the Control in European Family Firms: How Other Shareholders Affect Firm Value

Abstract

Manuscript type: EmpiricalResearch Question/Issue: This paper analyses the influence of large shareholders on firm value using a sample of firms from 11 European countries, specifically considering how the existence of a controlling coalition in family-owned firms and the contestability of control of the largest shareholder affect the value of the family-owned firms. Research Findings/Insights: We find that increased contestability of the control of the largest shareholder increases the value of family-owned firms. Results also show that in firms in which the largest shareholder is a family, a second family shareholder reduces firm value. Conversely, an institutional investor as second shareholder increases firm value. Likewise, better legal protection of shareholders not members of the controlling coalition increases the value of family firms. Theoretical/Academic Implications: We explore an under-examined aspect of agency conflict -contestability between large, dominant shareholders and minority shareholders. We highlight the role of the second and third largest shareholders, in terms of share and type of shareholder. We suggest the need for new avenues of research focused on the dynamics of power within the firm. Finally, we identify a situation in which conflict of interest becomes prominent. Practitioner/Policy Implications: This study corroborates policymakers' concerns regarding the protection of rights of minority shareholders. We suggest the need for a stronger macro governance environment to facilitate minority shareholder participation in corporate decision making. Our study also lends support to balanced ownership structures with multiple large shareholders as a way to increase the firm's performance. Managers would also better serve shareholders' interests by not limiting their attention to the current controlling coalition.

Prácticas De Responsabilidad Social, Reputación Corporativa Y Desempeño Financiero

“…De acuerdo a la literatura financiera, hemos introducido en nuestros modelos estimados una serie de variables de control que potencialmente incidan sobre el valor en la empresa (Berger & Ofek, 1995;Campa & Kedia, 2002;Jara-Bertin, López-Iturriaga, & López-de-Foronda, 2008), como lo son el tamaño de la empresa (LNTAB) medido por logaritmo natural del total de activos, el grado de endeudamiento (LEV) medido por la razón de endeudamiento total sobre el total de activos, la rentabilidad sobre los activos (ROA), diversificación medida como una variable dicotómica (DIV) que toma el valor 1 cuando la empresa se encuentra diversificada y cero en otro caso, y las oportunidades de crecimiento (CAPEXSAL) estimada como el CAPEX sobre las ventas. Cabe destacar, que algunas de estas variables de control han sido utilizadas en estudios previos (Bird et al, 2007;Callan & Thomas, 2009 Nota: Parámetros estimados para las pruebas no paramétricas de Kruskal-Wallis, la cual tiene por hipótesis nula la ausencia de diferencias significativas entre las medidas a comparar, y se contrasta por medio de una χ2.…”

Dominant institutional owners and firm value

“…Another factor that can affect the relationship between the dominant shareholder and firm performance is whether other shareholders with large holdings in the firm are present, and if so, the extent to which these other large shareholders limit or enhance the dominant shareholder's role in the firm (e.g., Pagano and Roell, 1998;Bennedsen and Wolfenzon, 2000;Bloch and Hege, 2001;Maury and Pajuste, 2005;Laeven and Levine, 2005;Jara-Bertin et al, 2008;Ruiz-Mallorquí and Santana-Martín, 2009). The influence of large shareholders with lower levels of participation than the dominant shareholder may depend on the size of the large shareholders' holdings and also on their identity (Laeven and Levine, 2005).…”

“…This research also extends prior literature on the relationship between institutional ownership and firm value (e.g., Brickley et al, 1988;Pound, 1988;Almazan et al, 2005;Borokhovich et al, 2006;Li et al, 2006;Cornett et al, 2007; by focusing on a context in which dominant institutional investors play an important role in the firm's decision-making process. This study additionally builds on the work of Maury and Pajuste (2005) and Jara-Bertin et al (2008) in the sense that, while these works analyze the effect of multiple large shareholders when the dominant owner is a family, our research considers this effect in a context in which the dominant investor is an institution.…”

Relación entre gobierno corporativo, control familiar y desempeño en empresas colombianas

“…En las ef, la concentración en la propiedad es alta (Acero y Alcalde, 2016), que sumado a la mayor posibilidad de acuerdos entre familias aumentan el poder de los accionistas y su capacidad para inducir a los directivos hacia la búsqueda del interés de los grandes accionistas (JaraBertin, López-Iturriaga & López-de-Foronda, 2008), aún a costa de los accionistas minoritarios. Por ejemplo, las familias pueden expropiar la riqueza de la empresa a través de compensaciones excesivas para sus miembros, transacciones con partes relacionadas o dividendos especiales (Anderson & Reeb, 2003).…”