Family Involvement and Dividend Policy in Closely Held Firms

2014 ◽  
Vol 27 (4) ◽  
pp. 365-385 ◽  
Author(s):  
Maximiliano González ◽  
Alexander Guzmán ◽  
Carlos Pombo ◽  
María-Andrea Trujillo
Keyword(s):  
Family Involvement ◽  
Dividend Policy ◽  
Agency Problems ◽  
Family Influence ◽  
Minority Shareholders ◽  
Family Involvement In Management ◽  
Board Representation ◽  
And Control ◽  
Wealth Expropriation

This article examines the effects of family involvement on dividend policy in closely held firms that face agency problems involving majority–minority shareholders. We argue that minority shareholders press for dividends when they perceive situations fostering wealth expropriation. Looking at 458 Colombian companies, we find that family involvement in management does not affect dividend policy; family involvement in both ownership and control through pyramids affects dividend policy negatively; and family involvement in control through disproportionate board representation affects dividend policy positively. Thus, family influence on agency problems, and hence on dividend policy as a mitigating mechanism, varies depending on family involvement.

scholarly journals The effect of ownership structure on dividend policy: evidence from Turkey

2016 ◽  
Vol 16 (1) ◽  
pp. 135-161 ◽  
Author(s):  
Basil Al-Najjar ◽  
Erhan Kilincarslan
Keyword(s):  
Family Involvement ◽  
Financial Institutions ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Dividend Yield ◽  
Minority Shareholders ◽  
Foreign Investors ◽  
Dividend Payout ◽  
Content Type ◽  
Listed Firms

Purpose This paper aims to investigate the impact of ownership structure on dividend policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family involvement (through ownership and board representation), non-family blockholders (foreign investors, domestic financial institutions and the state) and minority shareholders on dividend decisions in the post-2003 period as it witnesses the major economic and structural reforms. Design/methodology/approach The paper uses alternative dividend policy measures (the probability of paying dividends, dividend payout ratio and dividend yield) and uses appropriate regression techniques (logit and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 Istanbul Stock Exchange-listed firms (non-financial and non-utility) over a 10-year period 2003-2012. Findings The empirical results show that foreign and state ownership are associated with a less likelihood of paying dividends, while other ownership variables (family involvement, domestic financial institutions and minority shareholders) are insignificant in affecting the probability of paying dividends. However, all the ownership variables have a significantly negative impact on dividend payout ratio and dividend yield. Hence, the paper presents consistent evidence that increasing ownership of foreign investors and the state in general reduces the need for paying dividends in the Turkish market. Research limitations/implications Because of the absence of empirical research on how ownership structure may affect dividend policy and the data unavailability for earlier periods in Turkey, the paper cannot make comparison between the pre-and post-2003 periods. Nevertheless, this paper can be a valuable benchmark for further research. Practical implications The paper reveals that cash dividends are not used as a monitoring mechanism by investors in Turkey and the expropriation argument through dividends for Turkish families is relatively weak. Accordingly, the findings of this paper may benefit policymakers, investors and fellow researchers, who seek useful guidance from relevant literature. Originality/value To the best of the authors’ knowledge, this paper is the first to examine the link between ownership structure and dividend policy in Turkey after the implementation of major reforms in 2003.

scholarly journals The influence of board independence on dividend policy in controlling agency problems in family firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erhan Kilincarslan
Keyword(s):  
Dividend Policy ◽  
Family Firms ◽  
Agency Problems ◽  
Fiscal Year ◽  
Independent Directors ◽  
Board Independence ◽  
Minority Shareholders ◽  
Content Type ◽  
Turkish Family ◽  
The Impact

Purpose This study aims to investigate the impact of board independence on the cash dividend payments of family firms listed on the Borsa Istanbul (BIST) in balancing controlling families’ power to mitigate agency problems between family and minority shareholders in the post-2012 period. The authors focus on this period because Turkish authorities implemented mandatory regulations on the employment of independent directors on boards from fiscal year 2012. Design/methodology/approach The research model uses a panel dataset of 153 BIST-listed family firms over the period 2012–2017, employs alternative dependent variables and regression techniques and is applied to various sub-groups to improve robustness. Findings The empirical results show a strong positive effect of board independence on dividend decisions. The authors further detect that family directorship exhibits a negative effect, whereas both board size and audit committees have positive influences but chief executive officer (CEO)/duality has had no significant impact on the dividend policies of Turkish family firms since the new compulsory legal requirements in the Turkish market. Research limitations/implications The findings suggest that independent directorship and dividend policy are complementary governance mechanisms to reduce agency conflicts between families and minority shareholders in Turkey, which is a civil law-based emerging country characterized by high family ownership concentration. Practical implications The authors present evidence that Turkish family firms’ corporate boards have evolved, to some extent, from being managerial rubber stamps to more independent boards that raise opposing voices in family decision-making. However, independent directors’ preference for dividend-induced capital market monitoring implies that their direct monitoring is less effective than it is supposed to be. This suggests a need to revise the Turkish Corporate Governance Principles to enhance independent directors’ monitoring and supervisory power. Originality/value This is thought to be the first study to provide insights on how board independence influences dividend policy in controlling agency problems in Turkish family firms since Turkish authorities introduced compulsory rules on the employment of independent directors on boards.

scholarly journals Extract Or Not Extract? The Effect of Familism on Stock Option Plans

2016 ◽  
Vol 11 (5) ◽  
pp. 82 ◽  
Author(s):  
Claudia Arena ◽  
Simona Catuogno ◽  
Alessandro Cirillo ◽  
Luca Pennacchio
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Stock Option ◽  
Policy Implications ◽  
Minority Shareholders ◽  
Rent Extraction ◽  
Strike Price ◽  
Listed Firms ◽  
Market Index ◽  
Managerial Positions

<p>There is an ongoing debate in managerial literature regarding the aim of stock option plans (SOPs). In this paper we analyse whether and to what extent the family involvement in ownership and managerial positions affects the use of SOPs as tools to extract rents. By examining a sample of plans issued by Italian listed firms, we classify the SOPs according to their characteristics (i.e. vesting period, lock-up, strike price, market index) and identify three different clusters namely Rent SOPs, Non-Rent SOPs, Hybrid. After controlling for CEO family, board size, equity owned by minority shareholders, and other firm-specific characteristics, we find that family firms are less likely to adopt SOPs for rent extraction purpose. We also find that SOPs specifically granted to family members are less likely to pursue rent extraction goals. Our findings are robust against different specifications of family firms. This paper offers important theoretical contributions to management research and insightful policy implications for all family owned listed firms.</p>

Capturing the Familiness of Family Businesses: Development of the Family Influence Familiness Scale (FIFS)

2017 ◽  
Vol 41 (5) ◽  
pp. 709-742 ◽  
Author(s):  
Hermann Frank ◽  
Alexander Kessler ◽  
Thomas Rusch ◽  
Julia Suess–Reyes ◽  
Daniela Weismeier–Sammer
Keyword(s):  
High Reliability ◽  
Family Members ◽  
Reliability And Validity ◽  
Family Influence ◽  
Factor Analyses ◽  
Confirmatory Factor Analyses ◽  
Proficiency Level ◽  
Confirmatory Factor ◽  
The Family ◽  
And Control

This article develops a familiness scale measuring the family influence on the business via decision premises that express familiness. In three studies, we examine familiness with qualitative and quantitative approaches based on new systems theory. Narrative interviews are employed to generate items. Exploratory and confirmatory factor analyses led to a multidimensional scale (Family Influence Familiness Scale [FIFS]) comprising six dimensions: (1) ownership, management, and control; (2) proficiency level of active family members; (3) sharing of information between active family members; (4) transgenerational orientation; (5) family–employee bond; and (6) family business identity. Results indicate high reliability and validity levels.

Family involvement in management in private businesses and the effect on professional managers’ psychological ownership

2018 ◽  
Vol 9 (2) ◽  
pp. 225-243
Author(s):  
Hang Zhu ◽  
Pengxiang Zhang ◽  
Xiaoyan Han ◽  
Ting Huang
Keyword(s):  
Family Involvement ◽  
Negative Relationship ◽  
Personal Relationships ◽  
Psychological Ownership ◽  
Family Management ◽  
Content Type ◽  
Relationship Closeness ◽  
Professional Managers ◽  
Family Involvement In Management ◽  
Management Involvement

Purpose The purpose of this paper is to unveil how family involvement in management teams of private Chinese companies affects professional managers’ psychological ownership and sense of “us”, in the hopes of understanding why their devotion cannot coexist with the higher level of commitment of family managers. Design/methodology/approach This paper includes two main studies. The first uses regression to analyze survey data provided by 165 professional managers working in Chinese private companies. The second is a scenario experiment in which 106 MBA candidates participate. Findings The study finds that there is a negative relationship between family management involvement and professional managers’ perceived relationship closeness to owners and psychological ownership of firms. It also finds that relationship closeness fully mediates the negative influence of family management involvement on managers’ psychological ownership. Originality/value This paper contributes to both the theoretical literature and management practice. From a theoretical perspective, it connects studies in indigenous sociological psychology with new literature on psychological ownership. The paper finds that personal relationships nurture the shared psychological ownership of managers by generating a sense of “us”, providing a new theoretical explanation for its formation process. Furthermore, this study offers an explanation for the negative signal effect of family involvement in management. From a practical perspective, this study finds that family involvement in management acts as a critical boundary condition for using personal relationships to stimulate professional managers.

scholarly journals Examining the Impact of Innovation Forms on Sustainable Economic Performance: The Influence of Family Management

2019 ◽  
Vol 11 (21) ◽  
pp. 6132 ◽  
Author(s):  
Rubén Martínez-Alonso ◽  
María J. Martínez-Romero ◽  
Alfonso A. Rojo-Ramírez
Keyword(s):  
Family Involvement ◽  
Economic Performance ◽  
Firm Growth ◽  
Process Innovation ◽  
Family Management ◽  
Sustained Competitive Advantage ◽  
Negative Effect ◽  
Family Involvement In Management ◽  
The Impact ◽  
Positive Effect

The aim of this research is to explore the effect that innovation, as a potential source of sustained competitive advantage and firm growth, has on the achievement of sustainable economic performance. In particular, this paper empirically examines the influence of four innovation forms (intramural R&D, extramural R&D, product innovation, and process innovation) on firms’ sustainable economic performance, considering the moderating effect of family involvement in management. To test the hypotheses, random-effects regression analyses are applied to a longitudinal sample of 598 Spanish private manufacturing firms throughout the 2006–2015 period. The results show a negative effect of intramural and extramural R&D on sustainable economic performance and a positive effect of process innovation on sustainable economic performance. Moreover, a reinforced relationship between process innovation and sustainable economic performance is also revealed when family involvement in management acts as a moderator. The findings make several contributions to research and practice.

scholarly journals The agency origins of insider trading

1991 ◽  
Vol 22 (4) ◽  
pp. 87-93
Author(s):  
Sinclair Davidson ◽  
David Solomon
Keyword(s):  
Insider Trading ◽  
Government Intervention ◽  
Agency Problem ◽  
Agency Cost ◽  
Topical Issue ◽  
Minority Shareholders ◽  
And Control

Insider trading has been a topical issue in recent times. While the debate regarding insider trading usually extends to economic and ethical arguments in favour of or against the practice, in this article we attempt to ascertain the causes of the practice. The origins of insider trading are traced to the separation of ownership and control. It has been argued that insider trading is beneficial to minority shareholders and reduces the agency cost problem; this is shown to be fallacious. The authors conclude that insider trading is an agency problem and that the disciplinary mechanisms described in the literature do not inhibit the phenomena, indeed some of these mechanisms actually facilitate the occurrence of insider trading. This it is argued provides the rationale for government intervention and anti-insider trading legislation.Binnekringtransaksies het onlangs heelwat opspraak gewek. Die debat oor binnekringtransaksies bestaan hoofsaaklik uit die aanvoer van ekonomiese of etiese argumente vir of teen die praktyk. In hierdie artikel word gepoog om die oorsake van hierdie praktyk vas te stel. Die oorsprong van binnekringtransaksies word teruggevoer na die skeiding van eienaarskap en beheer. Daar is al aangevoer dat binnekringtransaksies tot die voordeel van minderheidsaandeelhouers strek, aangesien dit die agentskapsprobleem verminder, maar in hierdie artikel word aangetoon dat dit nie die geval is nie. Die skrywers kom tot die gevolgtrekking dat binnekringtransaksies 'n agentskapsprobleem is en dat die meganismes, wat volgens die literatuur hierdie praktyk aan bande behoort te le, dit in werklikheid vergemaklik. Daar word ook aangevoer dat die beweegrede vir optrede deur die staat, asook wetgewing om binnekringtransaksies te bekamp, hieruit voortspruit.

scholarly journals Refining the influence of family involvement in management on firm performance: The mediating role of technological innovation efficiency

2020 ◽  
pp. 234094442095733
Author(s):  
Rubén Martínez-Alonso ◽  
María J. Martínez-Romero ◽  
Alfonso A. Rojo-Ramírez
Keyword(s):  
Firm Performance ◽  
Technological Innovation ◽  
Family Involvement ◽  
Family Firms ◽  
Performance Outcomes ◽  
Jel Classification ◽  
Theory And Practice ◽  
Mediating Role ◽  
Research Fields ◽  
Family Involvement In Management

Determining what factors influence firm performance constitutes an essential issue in both the management and the family firm research fields. This article, building on the resource-based view perspective, develops a mediation model that involves a unique intervening mechanism, namely, technological innovation efficiency (TI efficiency), with the potential to explain the inconsistencies found in prior work on the ways through which family involvement in management affects performance outcomes. Regression analyses utilizing a longitudinal sample of 1,118 Spanish private firms largely support the hypothesized mediating relationship, revealing that TI efficiency leads to richer firm performance in family firms with active family involvement in management. Overall, our findings help elucidate the black box of performance outcomes within family firms and make several contributions to theory and practice. JEL CLASSIFICATION L25; M12; O32

Board Composition: Balancing Family Influence in S&P 500 Firms

2004 ◽  
Vol 49 (2) ◽  
pp. 209-237
Author(s):  
Ronald C. Anderson ◽  
David M. Reeb
Keyword(s):  
Family Firms ◽  
Balance Of Power ◽  
Family Influence ◽  
Independent Directors ◽  
Family Ownership ◽  
Board Composition ◽  
Public Firms ◽  
Founding Family ◽  
Board Representation ◽  
Balance Family

We examine the mechanisms used to limit expropriation of firm wealth by large shareholders among S&P 500 firms with founding-family ownership. Consistent with agency theory, we find that the most valuable public firms are those in which independent directors balance family board representation. In contrast, in firms with continued founding-family ownership and relatively few independent directors, firm performance is significantly worse than in non-family firms. We also find that a moderate family board presence provides substantial benefits to the firm. Additional tests suggest that families often seek to minimize the presence of independent directors, while outside shareholders seek independent director representation. These findings highlight the importance of independent directors in mitigating conflicts between shareholder groups and imply that the interests of minority investors are best protected when, through independent directors, they have power relative to family shareholders. We argue that expanding the discussion beyond manager-shareholder conflicts to include conflicts between shareholder groups provides a richer setting in which to explore corporate governance and the balance of power in U.S. firms.

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