How Do Family Ownership, Control and Management Affect Firm Value?
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family firms
ownership
control
management
value
Business Administration, Management, and Operations
ownership
control
management
value
Business Administration, Management, and Operations
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Using proxy data on all Fortune-500 firms during 1994–2000, we find that family ownership creates value only when the founder serves as CEO of the family firm or as Chairman with a hired CEO. Dual share classes, pyramids, and voting agreements reduce the founder's premium. When descendants serve as CEOs, firm value is destroyed. Our findings suggest that the classic owner-manager conflict in nonfamily firms is more costly than the conflict between family and nonfamily shareholders in founder-CEO firms. However, the conflict between family and nonfamily shareholders in descendant-CEO firms is more costly than the owner-manager conflict in nonfamily firms.
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2006-05-01
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Journal of Financial Economics