Does family involvement foster IPO value? Empirical analysis on Italian stock market

2015 ◽  
Vol 53 (5) ◽  
pp. 1125-1154 ◽  
Author(s):  
Alessandro Cirillo ◽  
Mauro Romano ◽  
Otello Ardovino
Keyword(s):  
Initial Public Offering ◽  
Family Involvement ◽  
Family Firms ◽  
Current Knowledge ◽  
Family Firm ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Long Run ◽  
Italian Context

Purpose – The purpose of this paper is to shed light on the relationship between family involvement and Initial Public Offering (IPO) value in the Italian context. Design/methodology/approach – Based on a unique hand-collected data set, the authors test the hypotheses on companies that went public between 2000 and 2011, making inference on 113 firms using OLS hierarchical regressions. The authors quantify the IPO value from an outside investors’ perspective with two measures to proxy for IPO value in the short-term and apply robustness checks for long-run performance. In a stewardship framework, the authors examine demographic variables including family firm status, family involvement in managerial positions and family generations. Findings – The results suggest that family firm status positively influences IPO value, that greater family involvement corresponds to higher IPO value and lastly, that the beneficial effect of family control is mainly attributable to the first generation. The results are robust to alternative specifications of each phenomenon. Research limitations/implications – As a single-country study, the results refer exclusively to the Italian context and thus the evidence provided may not automatically be generalized to IPOs of comparable equity markets. Originality/value – This study expands current knowledge by showing how investors “price” family ownership in an IPO; furthermore the authors assess how certain characteristics of family firms affect the IPOs (e.g. family involvement and intergenerational).

Innovation in family firms – a generational perspective

2019 ◽  
Vol 9 (2) ◽  
pp. 126-148 ◽  
Author(s):  
Sebastian Hillebrand
Keyword(s):  
Structural Equation ◽  
Family Firms ◽  
Family Firm ◽  
Family Influence ◽  
Family Management ◽  
Community Innovation Survey ◽  
Firm Innovation ◽  
Data Set ◽  
Content Type ◽  
Family Control

Purpose The purpose of this paper is to clarify the generation–innovation relationship in family firms. The study acknowledges that the degree of family influence on a firm varies over generations and tests if the generation–innovation relationship is affected by two defining characteristics of family influence (family management and intention to transfer family control). Based on recent research that deconstructed a family’s influence, this paper seeks to contribute to disentangling the ambivalent findings on family firm innovation. Design/methodology/approach The study draws on the Community Innovation Survey and analyzes a comprehensive data set of German family firms. The analysis builds on a structural equation model and tests if the two defining characteristics of family influence serve as mediators in the generation–innovation relationship. Findings The study suggests that family firms raise their innovation output over generations. Yet, a considerable fraction of the increase occurs via indirect paths – particularly via the intent to transfer family control to succeeding generations. The results indicate that increased family influence has positive and negative effects on innovation, reinforcing the need for careful application of the family firm definition. Research limitations/implications The sample is exclusively composed of German firms and the generalizability of the findings is limited. Future researchers may also overcome further limitations related to the survey data used. Practical implications The results urge family firm leaders to recognize the vital role of succession planning and non-family management involvement in an innovation context. Originality/value The study deconstructs the varying degree of family influence over generations and adds to the fields of family firm innovation, family firm definitions and typologies.

Does family involvement matter post IPO? Adding value through advertising in family firms

2018 ◽  
Vol 8 (3) ◽  
pp. 218-234 ◽  
Author(s):  
Atanas Nik Nikolov ◽  
Yuan Wen
Keyword(s):  
Firm Performance ◽  
Family Involvement ◽  
Family Business ◽  
Family Firms ◽  
Family Firm ◽  
Family Businesses ◽  
Publicly Traded ◽  
Content Type ◽  
The Public ◽  
The Family

PurposeThis paper brings together research on advertising, family business, and the resource-based view (RBV) of the firm to examine performance differences between publicly traded US family vs non-family firms. The purpose of this paper is to understand the heterogeneity of family vs non-family firm advertising after such firms become publicly traded.Design/methodology/approachThe authors draw on the RBV of the firm, as well as on extensive empirical literature in family business and advertising research to empirically examine the differences between family and non-family firms in terms of performance.FindingsUsing panel data from over 2,000 companies across ten years, this research demonstrates that family businesses have higher advertising intensity than competitors, and achieve higher performance returns on their advertising investments, relative to non-family competitors. The results suggest that the “familiness” of public family firms is an intangible resource that, when combined with their advertising investments, affords family businesses a relative advantage compared to non-family businesses.Research limitations/implicationsFamily involvement in publicly traded firms may contribute toward a richer resource endowment and result in creating synergistic effects between firm “familiness” and the public status of the firm. The paper contributes toward the RBV of the firm and the advertising literature. Limitations include the lack of qualitative data to ground the findings and potential moderating effects.Practical implicationsUnderstanding how family firms’ advertising spending influences their consequent performance provides new information to family firms’ owners and management, as well as investors. The authors suggest that the “familiness” of public family firms may provide a significant advantage over their non-family-owned competitors.Social implicationsThe implications for society include that the family firm as an organizational form does not need to be relegated to a second-class citizen status in the business world: indeed, combining family firms’ characteristics within a publicly traded platform may provide firm performance benefits which benefit the founding family and other stakeholders.Originality/valueThis study contributes by highlighting the important influence of family involvement on advertising investment in the public family firm, a topic which has received limited attention. Second, it also integrates public ownership in family firms with the family involvement–advertising–firm performance relationship. As such, it uncovers a new pathway through which the family effect is leveraged to increase firm performance. Third, this study also contributes to the advertising and resource building literatures by identifying advertising as an additional resource which magnifies the impact of the bundle of resources available to the public family firm. Fourth, the use of an extensive panel data set allows for a more complex empirical investigation of the inherently dynamic relationships in the data and thus provides a contribution to the empirical stream of research in family business.

scholarly journals Family ownership, governance choices and post-ipo performance

2017 ◽  
Vol 14 (4) ◽  
pp. 216-226
Author(s):  
Bharat A. Jain ◽  
Yingying Shao
Keyword(s):  
Initial Public Offering ◽  
Family Firms ◽  
Governance Mechanism ◽  
Investment Performance ◽  
Family Control ◽  
Ipo Performance ◽  
Family Versus ◽  
Long Run ◽  
Public Offering ◽  
Governance Choices

The purpose of this study is to evaluate the extent governance choices at the time of going public differ for family versus non family firms. In addition, the short and long-run performance of family and non-family firms after their initial public offering (IPO) is examined. The results indicate significant differences between family versus non-family firms on governance choices at the time of their IPO related to dual class structures, board composition, board size, and board leadership structure. Additionally, the results suggest that investors assign a lower valuation at IPO to family firms. Further, governance mechanism that strengthen family control differentially influence post-IPO underpricing. Finally, the results suggest that family firms underperform non-family firms in terms of long-run post-IPO investment performance.

A behavioral perspective on corporate dividend policy: evidence from France

2019 ◽  
Vol 19 (1) ◽  
pp. 102-119 ◽  
Author(s):  
Dhoha Trabelsi ◽  
Saqib Aziz ◽  
Jean-Jacques Lilti
Keyword(s):  
Dividend Policy ◽  
Family Firms ◽  
Investor Sentiment ◽  
Large Data ◽  
Payout Policy ◽  
High Concentration ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Managerial Opportunism

PurposeThis paper empirically examines the catering theory of Baker and Wurgler (2004) in the particular context of France. Considering the characteristics of French market – known for its high concentration of capital – it attempts to highlight the role family control plays in the managerial tendencies to satisfy non-informative dividend demands.Design/methodology/approachThe paper focuses on a large data set of French firms included in the SBF-250 index over a period of 1992-2010. It uses a variety of dividend policy measures, including dividend premium, percentage of dividend-paying firms and probability of paying dividends. It adopts appropriate empirical specifications (time-series and probit models) to substantiate the research hypotheses.FindingsThe empirical findings show that the percentage of payers rises with the dividend premium, and that the dividend premium and the confidence index of French households are negatively correlated. This reflects the sensitivity of dividend demand to investor sentiment. Moreover, results of multivariate panel regression show a positive and statistically significant effect of the dividend premium on the firm’s tendency to pay, after controlling for firm characteristics. Finally, it finds that the dividend premium effect disappears in the case of family-controlled firms. This result is in line with the long-term orientation of family firms.Research limitations/implicationsThe study focuses on the dividend payment behavior of French firms. Although dividends are deeply engrained in France, authors believe that it will be interesting to look at the whole payout policy and particularly the role played by share repurchases.Practical implicationsAddressing short-term catering and managerial opportunism, the results of this study may be of interest for shareholders, potential investors and regulators.Originality/valueTo the best of the authors’ knowledge, this is the first study that provides empirical evidence on Baker and Wurgler (2004) catering theory by considering the particularity of French market where, unlike the US, percentage of dividend-paying firms is high and the corporate ownership structures are different.

Innovation in family firms: an empirical taxonomy of owners using a mixed methods approach

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Udeni Salmon ◽  
Kurt Allman
Keyword(s):  
Mixed Methods ◽  
Family Firms ◽  
Family Firm ◽  
Policy Advice ◽  
Social Implications ◽  
Data Set ◽  
Content Type ◽  
Mixed Methods Approach ◽  
Innovation Approach ◽  
Firm Owners

Purpose The increasingly competitive manufacturing sector has made innovation crucial for the continued survival of family-owned SMEs. However, family firm owners are highly heterogenous and their diverse characteristics influence their approach to innovation. The purpose of this paper is to provide solutions to two heterogeneity related innovation problems: first, the failure of generic innovation policy advice to address the specific types of family firm owners; and second, the difficulty for owners in understanding how their innovation approach compares to their competitors. The solution is to create a taxonomy of family firm owner-innovators which creates innovator types. This taxonomy addresses these two problems: first, the taxonomy enables policy advice to be tailored to a particular innovator types; and second, the taxonomy allows owners to understand the strengths and weaknesses of their particular approach to innovation. Design/methodology/approach The approach is to develop a taxonomy through exploratory factor analysis (n=1,284) and firm owner interviews (n=27) in a mixed methods study. Socio-emotional wealth theory interprets the findings. Findings The findings present a taxonomy of family firm innovators which contains five types: the spontaneous radical, the statist altruist, the patient opportunist, the curious traveller and the insular denier. Research limitations/implications There are two major limitations: first, a taxonomy is static and does not include the temporal dimension of innovation which can change according to the firm lifecycle stage and, by implication, the changing preferences of a maturing firm owner; and second, the mixed methods approach of using two data sets which themselves used differing definitions of “family firm” has introduced the possibility that the constructs developed from the quantitative study may not have the precision or clarity of a study that uses a single data set with a single definition. Practical implications The practitioner implications from the research stem from the diagnostic potential of the taxonomy. SME family firm owners can establish their innovation approach by using the taxonomy to decide which type of innovator they are and by adopting an innovation approach that counterbalances the weaknesses of their type. Social implications The social implications are to improve the innovation potential of the family firm community by offering practical support to their innovation activities. Originality/value The originality of the research is in its contribution to knowledge on the role of ownership type in directing the innovation approach of SME family firms. The value of the research is in offering a theoretically informed original taxonomy that is of both academic and practical value.

scholarly journals TMT diversity and innovation ambidexterity in family firms

2019 ◽  
Vol 9 (4) ◽  
pp. 377-392 ◽  
Author(s):  
Irina Röd
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Firm Heterogeneity ◽  
Family Firm ◽  
Cross Sectional ◽  
Firm Innovation ◽  
Content Type ◽  
Mediating Role ◽  
The One ◽  
The Relationship

Purpose Family firms that simultaneously engage in multiple levels of innovation – incremental and radical – are likely to enjoy performance advantages across generations. The purpose of this paper is to research under which management conditions (i.e. top management team (TMT) diversity in terms of generational or non-family involvement) family firms are more likely to achieve innovation ambidexterity. Also, the paper addresses the mediating role of open innovation (OI) breadth in this relationship. Design/methodology/approach A large cross-sectional sample of 335 small- and medium-sized family firms is used. The hypotheses were tested in a mediation model. The relationship between TMT diversity and ambidexterity is measured using a binominal regression analysis, the one between TMT diversity and OI breadth using a Tobit model. Findings Drawing on the family firm upper echelon perspective, the results indicate that TMT diversity induced through external managers and multiple generations is positively related to innovation ambidexterity. As the mediation analysis reveals, the relationship can be explained by the higher propensity of diverse TMTs to get involved in OI breadth. The findings add to the discussion on family firm heterogeneity and its influence on different kinds of innovation. Originality/value So far, few studies have been concerned with ambidextrous family firms. Contrary to their reputation, this study identifies family firms as radical as well as open innovators. As such, this research takes account not only of the heterogeneity of family firms, but also of the heterogeneity of family firm innovation.

FAMILY FIRM IPO PERFORMANCE AND MARKET SIGNALS

2009 ◽  
Vol 17 (01) ◽  
pp. 55-77 ◽  
Author(s):  
HUNG-BIN DING ◽  
KUNTARA PUKTHUANTHONG-LE
Keyword(s):  
Initial Public Offering ◽  
Family Firms ◽  
Family Firm ◽  
Ipo Performance ◽  
Market Signals ◽  
Long Run ◽  
Public Offering ◽  
Long Term Performance ◽  
Term Performance ◽  
The Impact

Recently, the interests in the performance of family firms in the capital market are on the rise. However studies on long-term performance give us little information about the performance of family firms in the initial public offering (IPO) markets. Building on agency theory, we investigated the effect of three IPO signals in family firm IPOs. Practices such as the appointment of outside non-family directors and waiting longer before going public significantly reduce underpricing. In addition, family owners' intent to retain large percentage of share in the long run is an indication of original shareholders' level of confidence in their own companies. Such confidence helps reduce after market investors' uncertainty and thus underpricing. On the other hand, family ownership at the IPO positively moderates the impact of non-family directors on underpricing.

Professionalization of Family Business and Performance Effect

2013 ◽  
Vol 27 (4) ◽  
pp. 346-364 ◽  
Author(s):  
Yung-Chih Lien ◽  
Shaomin Li
Keyword(s):  
Initial Public Offering ◽  
Family Firms ◽  
Negative Impact ◽  
Governance Structure ◽  
Data Set ◽  
Performance Effect ◽  
Family Control ◽  
Ipo Performance ◽  
And Performance ◽  
Public Offering

This study seeks to understand the governance of post–initial public offering (IPO) family firms and its impact on performance. Using an analysis of a balanced panel data set of 205 publicly listed firms in Taiwan spanning 10 years (2,050 firm-years), we found that extensive family control has a negative impact on the post-IPO performance and that nonfamily block shareholders may divest their stockholdings in these firms to protect their investments. To sustain equity support from their block shareholders, post-IPO family firms should combine the use of family control with professional management in their corporate governance structure.

The effect of family control on audit fees during financial crisis

2020 ◽  
Vol 35 (5) ◽  
pp. 645-665
Author(s):  
Jihad Al-Okaily
Keyword(s):  
Family Involvement ◽  
Fixed Effects ◽  
Family Firms ◽  
Audit Fees ◽  
Fixed Effect Model ◽  
Policy Implications ◽  
Content Type ◽  
Family Control ◽  
Effect Model ◽  
The Impact

Purpose The purpose of this study is to empirically examine the effect of family involvement in ownership, management and directorship on audit fees during the crisis and non-crisis periods. Design/methodology/approach Following Anderson and Reeb (2003), this paper uses a two-way fixed effect model to examine the impact of family control on audit fees in crisis and non-crisis periods. The fixed effects include dummy variables for each year and each industry code in the sample. Findings This paper finds that during normal economic periods, family firms pay lower audit fees relative to non-family firms because of the incentive alignment or monitoring effect. While, during crisis periods, family firms pay higher audit fees because of the shareholder expropriation effect. Research limitations/implications The results reported in this paper have both practical and policy implications for the demand and supply of audit services to firms having different ownership structures. Originality/value This is the first study of its kind to examine the effect of family ownership and involvement on audit fees during the crisis period.

Socioemotional wealth and performance in private family firms

2019 ◽  
Vol 9 (4) ◽  
pp. 468-496 ◽  
Author(s):  
Mohammad Rezaur Razzak ◽  
Suaad Jassem
Keyword(s):  
Firm Performance ◽  
Family Firms ◽  
Family Firm ◽  
Emotional Attachment ◽  
Socioemotional Wealth ◽  
Content Type ◽  
Family Control ◽  
Financial Wealth ◽  
Family Commitment ◽  
Dynastic Succession

Purpose Although family business literature acknowledges that family firms owners are motivated by a set of socioemotional wealth (SEW) goals along with firm-centric business goals, yet a consistently predictable pattern of relationship between SEW and financial wealth is yet to be discerned. The purpose of this paper is to propose a theoretical model based on the stakeholder approach to suggest that family commitment mediates the association between the dimensions of SEW and firm performance. Design/methodology/approach A set of hypotheses are proposed that are tested using structural equation modeling with data collected from 357 medium to large sized privately held family firms in Bangladesh. The data analysis is done with SmartPLS (v.3.2). Findings The results indicate that family commitment partially mediates the relationships between family control and influence, family identification, emotional attachment and renewal of family bonds through dynastic succession and firm performance. The only non-significant relationship was between binding social ties and firm performance. The results provide a more nuanced understanding of the link between SEW goals and firm performance, and present important implications for theory and practice. Research limitations/implications The cross-sectional nature of the study exposes it to the specter of common method bias despite the fact that procedural remedies were initiated to minimize the impact of such occurrence. A longitudinal study with data obtained from multiple individuals at different levels of the organization would possibly yield more robust findings. Furthermore, in the absence of a multi-country and multi-sector analysis, a broad generalization of the findings may not be feasible. Practical implications The knowledge that family identity, emotional attachment and renewal of family bonds through dynastic succession may be leveraged to enhance the commitment of subsequent generation of family firm owners to the firm that may be pertinent to incumbents who desire to see their successors more engaged in the family enterprise. Furthermore, knowing that excessive focus on family control over the firm leads to negative outcomes is also pertinent to family firm leaders. Social implications Survival of family businesses is vital to the global economy as one of the primary drivers of global GDP growth and source of new employment. Policy makers can benefit from the findings of this study to customize policies that take into cognizance the importance of SEW owners of family firms and the fact that some of these SEW goals actually benefit the firm in terms of enhanced commitment to the enterprise and consequently superior firm performance. Originality/value The role of family commitment as a mediator between SEW and firm performance has not been dominant in the literature. By providing a finer-grained understanding of how family commitment accounts for the relationship between family-centric non-economic goals such as SEW and firm-centric goals such as business performance, the study presents a theoretical link between sociomemotional wealth and financial wealth in the context of private family firms.

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