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.

scholarly journals The performance of family firms: A study of “going public” effect in Portugal

2017 ◽  
Vol 14 (4) ◽  
pp. 132-149
Author(s):  
José Manuel Bernardo Vaz Ferreira
Keyword(s):  
Capital Investment ◽  
Family Firms ◽  
Operating Efficiency ◽  
Activity Levels ◽  
Financial Health ◽  
Going Public ◽  
Traditional Family ◽  
Policy Performance ◽  
The Family ◽  
Public Share

The aim of this study is to investigate the pre and post going public process of the operational, social, and financial and dividend policy performance of twenty-five Portuguese family companies in most of the sectors of economic activity that went public through public share offering and direct sale. In a family firm, the business belongs to a family, in which, most of the family members work. This investigation develops a framework to conclude if the decision to open the capital by the traditional family firms to the investors, in general, had caused or not, improvements on the economic and financial health of those firms. On the economic side, we find relevant declines in profitability, operating efficiency and activity levels and an increase in capital investment and real output. On the employment side, we document an irrelevant decline on employment. On the financial side, we observe that the financial equilibrium of firms after going public was negatively affected. On the dividend side, we document an increase in the dividend payout. Lastly, our results are generally robust surviving the partition of the dataset into various sub-samples.

Global financial crisis, ownership structure and firm financial performance

2017 ◽  
Vol 34 (4) ◽  
pp. 447-465 ◽  
Author(s):  
Ali Salman Saleh ◽  
Enver Halili ◽  
Rami Zeitun ◽  
Ruhul Salim
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Ownership Structure ◽  
Family Firms ◽  
Global Financial Crisis ◽  
Ownership Concentration ◽  
Financial Leverage ◽  
Content Type ◽  
Crisis Period ◽  
The Global Financial Crisis

Purpose This paper aims to investigate the financial performance of listed firms on the Australian Securities Exchange (ASX) over two sample periods (1998-2007 and 2008-2010) before and during the global financial crisis periods. Design/methodology/approach The generalized method of moments (GMM) has been used to examine the relationship between family ownership and a firm’s performance during the financial crisis period, reflecting on the higher risk exposure associated with capital markets. Findings Applying firm-based measures of financial performance (ROA and ROE), the empirical results show that family firms with ownership concentration performed better than nonfamily firms with dispersed ownership structures. The results also show that ownership concentration has a positive and significant impact on family- and nonfamily-owned firms during the crisis period. In addition, financial leverage had a positive and significant effect on the performance of Australian family-owned firms during both periods. However, if the impact of the crisis by sector is taking into account, the financial leverage only becomes significant for the nonmining family firms during the pre-crisis period. The results also reveal that family businesses are risk-averse business organizations. These findings are consistent with the underlying economic theories. Originality/value This paper contributes to the debate whether the ownership structure affects firms’ financial performance such as ROE and ROA during the global financial crisis by investigating family and nonfamily firms listed on the Australian capital market. It also identifies several influential drivers of financial performance in both normal and crisis periods. Given the paucity of studies in the area of family business, the empirical results of this research provide useful information for researchers, practitioners and investors, who are operating in capital markets for family and nonfamily businesses.

Debt and ownership structure: evidence from Italy

2016 ◽  
Vol 16 (5) ◽  
pp. 883-905 ◽  
Author(s):  
Fabrizio Rossi ◽  
Richard J. Cebula
Keyword(s):  
Ownership Structure ◽  
Institutional Investors ◽  
Agency Costs ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Ownership Concentration ◽  
Policy Makers ◽  
Content Type ◽  
Practical Implications

Purpose The purpose of this study is to investigate the relationship between the debt and ownership structure of a sample of Italian-listed companies to measure the role assumed in the control and monitoring of agency costs. Design/methodology/approach This study examines a balanced panel data, using both a random effects model and a generalized method of moments model to better capture any problems related to the endogeneity of the variables in the model. Findings The results provide evidence of a positive relationship between debt and ownership concentration on the one hand and a negative relationship between debt and institutional investors on the other hand. The debt seems to assume both functions, i.e. the disciplinary role of substitute at low levels of ownership concentration and a complementary role at high levels of ownership concentration. Practical implications This study provides three practical implications. The first is that the complementarity between debt and ownership concentration provides evidence of the entrenchment effect and tends to weaken the company financially. Second, the results also provide useful prompts to policy-makers who should encourage the presence of institutional investors. Third, the policy-makers should also encourage the expansion of the stock market to enhance the protection of shareholders, reduce private control benefits and provide Italy the same opportunities as other common and civil law countries to collect risk capital, avoiding the abuse of debt. Originality/value The empirical results suggest that ownership concentration increases the degree of corporate debt, whereas institutional investors assume the disciplinary role of monitoring and controlling agency costs. The results provide evidence of both the entrenchment effect and the alignment-of-interests hypothesis and that the expropriation theory seems to prevail over the control and monitoring role.

The impact of bridging social capital in family firms' performance: exploring the mediation role of successor's social skills

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hedi Yezza ◽  
Didier Chabaud ◽  
Léo Paul Dana ◽  
Adnane Maalaoui
Keyword(s):  
Social Capital ◽  
Social Skills ◽  
Financial Performance ◽  
Family Firms ◽  
Sem Analysis ◽  
Content Type ◽  
Bridging Social Capital ◽  
One Year ◽  
The Impact

PurposeThis paper investigates the impact of bridging social capital on the financial and non-financial performance of family businesses and explores the mediation role of social skills in the context of family succession.Design/methodology/approachA quantitative study, through questionnaires, was conducted among 105 Tunisian family firms that have experienced a family succession for at least one year. The PLS-SEM analysis method was used to test the research hypothesis.FindingsResults show that an increase in external social capital is positively associated with financial performance and family-centred non-economic goals, whereas social skills mediate this positive relationship.Originality/valueThe proposed model aims to test the direct effect of bridging social capital on family firms' performance and exploring the mediation role of the successor's social skills.

scholarly journals Firm Performance and the Nature of Agency Problems in Insiders-controlled Firms: Evidence from Pakistan

2012 ◽  
Vol 51 (4II) ◽  
pp. 161-183 ◽  
Author(s):  
Fahad Abdullah ◽  
Attaullah Shah ◽  
Safi Ullah Khan
Keyword(s):  
Firm Performance ◽  
Property Rights ◽  
Ownership Structure ◽  
Agency Costs ◽  
Adam Smith ◽  
Agency Problems ◽  
Management Control ◽  
Research Studies

More than two centuries ago, Adam Smith (1776) showed skepticism about the efficiency of joint stock companies because of the separation of management from ownership. He observed that managers of joint stock companies cannot be expected to watch over the business with the same anxious vigilance as owners in a partnership would. Adam Smith’s worry remained buried for a century and a half until Berle and Means (1932) rekindled interest in this area when they hypothesised in their book that dispersed shareholding is an inefficient form of ownership structure. They argued that separation of ownership and management control has changed the role of owner from being active to the passive agent. Dispersed shareholders lack incentives to monitor self-interested managers who possess only a small fraction of the total shareholdings. The propositions by Adam Smith (1776) and Berle and Means (1932) received some support when Jensen and Meckling (1976) tied together the elements of property rights, agency costs, and finance to develop a theory of ownership structure of a firm. Jensen and Meckling asserted that agency costs are real, which the owner can reduce either by increasing ownership stake of the agent in the firm or by incurring monitoring and bonding costs. In early tests, several research studies supported the views of Jensen and Meckling. However, these studies did not account for endogeneity problem.

scholarly journals Family influence and firm performance: the mediating role of stewardship

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Catarina Afonso Alves ◽  
Ana Paula Matias Gama ◽  
Mário Augusto
Keyword(s):  
Financial Performance ◽  
Structural Equation ◽  
Family Firms ◽  
Mediating Effect ◽  
Family Influence ◽  
Content Type ◽  
Organizational Attitudes ◽  
Mediating Role ◽  
Firm Financial Performance

PurposeThis study examines how stewardship might mediate the influence of family ownership on firm financial performance. The authors argue that differences in financial performance may reflect not only the family's influence but also the prevalence of a stewardship-oriented culture, across varying degrees of family influence.Design/methodology/approachThe measure of family influence uses the F-PEC scale: family [F], power [P], experience [E] and culture [C]. It supports cross-firm comparisons of different levels of family influence. To capture the multidimensional nature of family influence, this study uses structural equation modelling and measures the meditating effects of stewardship.FindingsThe results reveal a mediating effect of stewardship; family firms achieve better performance when they take advantage of and encourage stewardship attitudes among owners and leaders. Factors associated with stewardship behaviour, including stewardship motivation and stewardship culture, help explain why some family firms perform better than others.Practical implicationsWhen analysing the behaviour of family firms, interested entrepreneurs, managers and consultants should acknowledge that the family's influence entails both financial and emotional capital. The survival of the family businesses depends on balancing these aspects.Originality/valueIn response to calls for research into mediators of the complex relationship between family influence and firm outcomes, this study provides a novel explanation for performance-maximizing behaviours by organizations, in which pro-organizational attitudes coexist with self-serving motives.

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