The Debt Agency Costs of Family Ownership: Firm Level Evidence on Small and Micro Firms

2007 ◽  
Author(s):  
Mervi Niskanen ◽  
Virpi Kaikkonen ◽  
Jyrki Niskanen
Keyword(s):  
Agency Costs ◽  
Family Ownership ◽  
Firm Level

The debt agency costs of family ownership in small and micro firms

2010 ◽  
Vol 11 (3) ◽  
pp. 353 ◽  
Author(s):  
Mervi Niskanen ◽  
Jyrki Niskanen ◽  
Virpi Laukkanen
Keyword(s):  
Agency Costs ◽  
Family Ownership

scholarly journals RELATIONSHIP BETWEEN FAMILY OWNERSHIP, AGENCY COSTS TOWARDS FINANCIAL PERFORMANCE AND BUSINESS STRATEGY AS MEDIATION

2018 ◽  
Vol 19 (0) ◽  
pp. 49-58
Author(s):  
Enni Savitri
Keyword(s):  
Financial Performance ◽  
Business Strategy ◽  
Agency Costs ◽  
Stock Exchange ◽  
Partial Least Square ◽  
Least Square ◽  
Business Strategies ◽  
Family Ownership ◽  
Manufacturing Companies ◽  
The Relationship

This study investigates the relationship between family ownership, agency costs, financial performance, and companies’ business strategies. The targeted population of this study were all 143 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2007–2014. About 31% (45) of these manufacturing companies are family companies. The hypotheses were tested using the partial least-square (PLS) method. Our findings reveal that the companies’ business strategies are not affected by the family ownership. Family ownership and business strategies influence companies’ financial performance. Agency costs influence business strategy and financial performance, and this shows that agency costs contribute to both the increase and decrease of financial performance. Business strategy mediates the relationship between family ownership and financial performance. This shows that family companies do not concentrate on financial goals but rather on the sustainability. Business strategy influences the relationship between agency costs and financial performance. This shows that funds can be redistributed in the course of business strategy planning, which will, in turn, improve the company’s 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.

Are family firms more optimistic than non-family firms?

2019 ◽  
Vol 32 (3) ◽  
pp. 399-416 ◽  
Author(s):  
Xuan Huang ◽  
Fei Kang
Keyword(s):  
Family Firms ◽  
Earnings Announcements ◽  
Family Ownership ◽  
Press Releases ◽  
Firm Level ◽  
Content Type ◽  
Alternative Measures ◽  
Disclosure Tone ◽  
The Impact ◽  
Earnings Press Releases

Purpose The purpose of this study is to investigate how family ownership affects the disclosure tone of firm earnings press releases. Design/methodology/approach Following prior literature, this study defines family firms as those in which members of the founding families continue to hold positions in top management, to sit on the board or to be blockholders. The disclosure tone of earnings press releases is measured by the level of optimism in firms’ earnings announcements using Loughran and McDonald’s (2011) word classifications. Multivariate analysis is performed to examine the impact of family ownership on firms’ disclosure tone. Additional analysis includes controlling for different firm-level characteristics and using alternative measures of disclosure tone. Findings This study documents that the disclosure tone of earnings announcements is more optimistic for family firms than for non-family firms. The result implies that family owners’ large undiversified equity position in their business results in strong incentives for them to issue more positive earnings announcements to maintain high stock performance. Further analysis reveals that the results are mainly driven by family firms with founder CEOs. The results are robust to controls for corporate governance characteristics and to alternative measures of corporate disclosure tone. Originality/value The findings of this study contribute to the literature that examines factors associated with the determinants of the tone in firms’ earnings announcements. In addition, this study adds to the extant literature on family firms by providing useful insight into the influence of family control on corporate voluntary disclosure.

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.

Over-investment, the marginal value of cash holdings and corporate governance

2015 ◽  
Vol 32 (2) ◽  
pp. 204-221 ◽  
Author(s):  
Chih Jen Huang ◽  
Tsai-Ling Liao ◽  
Yu-Shan Chang
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Negative Impact ◽  
Cash Holdings ◽  
Firm Level ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Marginal Value ◽  
Value Of Cash ◽  
Cash Reserves

Purpose – The purpose of this paper is to examine how investors’ valuation of cash holdings is related to firm-level investment. Design/methodology/approach – As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders. Findings – By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH. Practical implications – This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash. Originality/value – This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.

Economic exposure to exchange rate risk and financial hedging

2019 ◽  
Vol 46 (4) ◽  
pp. 965-984 ◽  
Author(s):  
Ekta Sikarwar ◽  
Roopak Gupta
Keyword(s):  
Exchange Rate ◽  
Practical Significance ◽  
Family Ownership ◽  
Governance Mechanism ◽  
Firm Level ◽  
Content Type ◽  
Exchange Rate Exposure ◽  
Financial Hedging ◽  
Non Linear ◽  
Currency Derivatives

Purpose The purpose of this paper is to examine the potential non-linear relationship between family ownership as a governance mechanism and exchange rate exposure of firms that use financial hedging. Design/methodology/approach The exchange rate exposure is estimated using two-factor Jorion (1990) model for a sample of 312 Indian firms over the period from 2001 to 2016. The cross-sectional regression model is used at the second stage to investigate the effects of family ownership on exposure for the firms that use currency derivatives. Findings The results suggest a significant non-linear cubic relationship between family ownership and exchange rate exposure. Exchange rate exposure increases with family ownership at low and high levels (as a result of improper hedging) and decreases with family ownership at intermediate levels (as a consequence of value-enhancing hedging). Practical implications The study has practical significance for firms to understand the circumstances in which currency derivatives usage is ineffective in alleviating exposure. Firms that have high or low family ownership should integrate operational hedges with financial hedges and should incorporate other firm-level governance mechanisms to avoid the misuse of derivatives. Originality/value This study provides new evidence that the relationship between family ownership and exchange rate exposure is non-linear for firms that use financial hedging which has not been investigated before in the prior literature.

Family firms and corporate social responsibility: exploring “concerns”

2017 ◽  
Vol 10 (4) ◽  
pp. 469-487 ◽  
Author(s):  
Nai Hua Lamb ◽  
Frank Butler ◽  
Philip Roundy
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Family Firms ◽  
Employee Relations ◽  
Family Ownership ◽  
Firm Level ◽  
Content Type ◽  
Public Firms ◽  
Level Data ◽  
Corporate Social

Purpose Scholars are devoting increasing attention to understanding a specific type of strategic initiative in family firms: corporate social responsibility (CSR). Prior studies have focused on the strengths of family firms’ CSR performance. However, to more fully understand family firms and their engagement in CSR, a granular approach is needed that teases apart the strengths and concerns of CSR performance and examines the specific dimensions that comprise CSR performance. Thus, the purpose of this paper is to theorize about six negative (i.e. concern-oriented) dimensions of family firms’ CSR performance. Design/methodology/approach To examine the interrelationship between a firm’s percentage of family ownership and its CSR concerns, a sample of 71 public firms from Fortune 500 companies was constructed. The sample includes 13 years of firm-level data spanning 1994-2006 and represents over 600 firm-year observations. Findings As predicted, a higher percentage of family owners’ equity is positively related to diversity-oriented CSR concerns and negatively related to employee relations and environmental CSR concerns. However, the percentage of equity owned by family members is not associated with community, product quality and safety, and corporate governance CSR concerns. Originality/value The paper addresses substantive omissions in existing research on the influence of family ownership on CSR performance.

Sign in / Sign up

Export Citation Format

Share Document