scholarly journals External Governance and Debt Agency Costs of Family Firms

2007 ◽  
Vol 2007 (908) ◽  
pp. 1-58 ◽  
Author(s):  
Andrew Ellul ◽  
◽  
Levent Guntay ◽  
Ugur Lel
Keyword(s):  
Agency Costs ◽  
Family Firms ◽  
External Governance

Main financial factors influencing the survival, development and performance of family firms

2012 ◽  
pp. 125-143
Author(s):  
Oscar Domenichelli
Keyword(s):  
Agency Costs ◽  
High Performance ◽  
Family Firms ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Debt Finance ◽  
Personal Savings ◽  
And Performance ◽  
Control And Management ◽  
Personal Assets

Sometimes the impossibility of employing an adequate level of debt may prevent family firms from developing or reaching high performance; however, they can increase their ability to collect debt finance thanks to personal assets to collateralize or personal guarantees, supplied by family members. Furthermore, agency costs of equity are negligible in family businesses, owing to the insignificant separation among the functions of ownership, control and management and their intra-familial altruistic linkages, but agency costs of debt are high, as family firms are usually small or medium-sized enterprises and, thus, more opportunistic and little transparent. Agency conflicts between majority and minority shareholders prevent family firms, to some extent, from getting equity finance and developing, as non-family and minority shareholders may undergo a loss of personal wealth. The level of debt tends to increase when family firms grow. In the early stages of its development, a family-owned firm usually relies on personal savings and sources of capital provided by friends and relatives; while, in the later stages of its growth, a family-owned firm can more easily employ debt and external equity to finance its development.

Governance and long-term operating performance of family and non-family firms in Australia

2015 ◽  
Vol 32 (4) ◽  
pp. 398-421 ◽  
Author(s):  
Enver Halili ◽  
Ali Salman Saleh ◽  
Rami Zeitun
Keyword(s):  
Agency Costs ◽  
Family Firms ◽  
Conflicts Of Interest ◽  
Operating Performance ◽  
Survival Rates ◽  
Listed Companies ◽  
Family Ownership ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this study is to conduct a comparative analysis of the long-term operating performance of family and non-family firms from the agency theoretic perspective. The analysis is focused on investigating the impact of family ownership on principal–agent conflicts of interest. Design/methodology/approach – This paper examines the relationship between firm operating performance and family ownership for a large sample of 677 Australian-listed companies. The paper uses the Generalised Method of Moments (GMM) estimator model developed by Arellano and Bond (1991) and used by other studies in finance (Baltagi, 2012; Bond, 2002; Mohamed et al., 2008). Findings – The empirical results show that firms with ownership concentration has a better operating performance due to the alignment of owner-management interests. This study also finds that family-listed companies have higher survival rates and perform better than non-family companies. Findings support the hypothesis that agency costs arise as a result of privileged access of information and self-interest behaviour of managers (outsiders) in firms with dispersed ownership structures. Originality/value – Earlier studies have only focused on short-term perspectives, particularly investigating small and medium types of Australian family businesses from narrow aspects, such as productivity, business behaviour, capital structure and leverage. Therefore, this paper has conducted a comparative examination of family and non-family firms listed on the Australian Stock Exchange (ASX) to identify the impact of agency costs on their financial performance.

An Organizational Justice-Based View of Self-Control and Agency Costs in Family Firms

2007 ◽  
Vol 44 (6) ◽  
pp. 955-971 ◽  
Author(s):  
Michael H. Lubatkin ◽  
Yan Ling ◽  
William S. Schulze
Keyword(s):  
Organizational Justice ◽  
Agency Costs ◽  
Family Firms ◽  
Self Control

scholarly journals Agency costs, corporate governance mechanisms and performance of public listed family firms in Malaysia

2011 ◽  
Vol 42 (3) ◽  
pp. 17-26 ◽  
Author(s):  
H. Ibrahim ◽  
F. A. Samad
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Value ◽  
Agency Costs ◽  
Family Firms ◽  
Family Ownership ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Utilization Ratio ◽  
And Performance

We compare corporate governance and performance between family and non-family ownership of public listed companies in Malaysia from 1999 through 2005 measured by Tobin’s Q and ROA. We also examine the governance mechanisms as a tool in monitoring agency costs based on asset utilization ratio and expense ratio as proxy for agency costs. We find that on average firm value is lower in family firms than non-family firms, while board size, independent director and duality have a significant impact on firm performance in family firms as compared to non-family firms. We also find that these governance mechanisms have significant impact on agency costs for both family and non-family firms.

Family firms, debtholder–shareholder agency costs and the use of covenants in private debt

2009 ◽  
Vol 7 (4) ◽  
pp. 477-509 ◽  
Author(s):  
Mark Bagnoli ◽  
Hsin-Tsai Liu ◽  
Susan G. Watts
Keyword(s):  
Agency Costs ◽  
Family Firms ◽  
Private Debt

scholarly journals Can agency theory recommendations affect performance of family firms? Evidence from the Italian market

2007 ◽  
Vol 4 (4) ◽  
pp. 9-17
Author(s):  
Stefano Caselli ◽  
Stefano Gatti
Keyword(s):  
Agency Theory ◽  
Agency Costs ◽  
Family Firms ◽  
Stock Exchange ◽  
Foreign Investor ◽  
Insider Ownership ◽  
Low Level ◽  
Italian Market ◽  
Using Data ◽  
High Level

Using data on all family owned firms listed on the Italian Stock Exchange for the entire period between 2001 and 2005, it is shown that agency theory prescriptions and monitoring activities differentially impact the market value and profitability of family owned firms. Specifically, nonfounder family firms benefit from a low level of board and insider stock ownership and a high level of stockholder and foreign investor ownership, because these firms necessarily face high agency costs. Conversely, founder family firms benefit from a high level of board and insider ownership, and a low level of stockholder and foreign investor ownership, owing to their lower agency costs

scholarly journals Determinants of performance of closely – held (family) firms after going public: the role of the ownership structure, economy, changes in top management, partial sale, equity concentration after the IPO and shareholders in management

2008 ◽  
Vol 5 (2) ◽  
pp. 55-67 ◽  
Author(s):  
José Manuel Bernardo Vaz Ferreira
Keyword(s):  
Financial Performance ◽  
Ownership Structure ◽  
Agency Costs ◽  
Capital Investment ◽  
Family Firms ◽  
Activity Levels ◽  
Third Place ◽  
Going Public ◽  
Good Shape

When a closely-held (family) company goes public, there are very specific and particular determinants that have crucial influences on the post-going public operational, social and financial performance of those firms. We investigate why firms decline significantly their profitability, efficiency, employment and activity levels, and show an increase on sales and capital investment when there is a transition from private to public ownership. We conclude that this decrease in performance is significantly higher, when one or more than one of the following facts happen after firms going public: first, when there are not shareholders in management, what implies increased agency costs; secondly, when the level of equity concentration after going public is low; in third place, when the level of equity retention by the founding shareholder is low; fourth, when the economy health during the timing of the sale is not in good shape; and lastly, when the old CEO is changed.

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