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.

scholarly journals President interlocking, family firms and performance during turbulent times: Evidence from Latin America

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Karen Watkins-Fassler ◽  
Virginia Fernández-Pérez ◽  
Lázaro Rodríguez-Ariza
Keyword(s):  
Latin America ◽  
Financial Performance ◽  
Latin American ◽  
Family Firms ◽  
Annual Data ◽  
Minority Shareholders ◽  
Return On Assets ◽  
Publicly Traded Companies ◽  
Turbulent Times ◽  
And Performance

n Latin America, company ownership is typically concentrated in the hands of controlling families, who build powerful business groups which facilitate interlocking practices. The purpose of this study is to examine how President interlocking relates with financial performance in Latin American firms, under uncertainty circumstances. Using regression analysis (panel least squares), the association between return on assets and President interlocking during turbulent times is analyzed. For the latter, annual data (2009–2010) from non-financial publicly traded companies in Chile (243 firms) and Mexico (89 firms) is employed. It is documented that President interlocking in Latin American firms is positively associated with financial performance. However, this effect is higher in Chile than in Mexico, where minority shareholders and other stakeholders are better protected against expropriation. This study increases the understanding of the strengths of President interlocks in stormy times, by introducing the Latin American context.

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.

scholarly journals Agency conflicts and choice of specialist audit firms and audit partners: Signaling or substantial monitoring?

2013 ◽  
Vol 10 (3) ◽  
pp. 114-128
Author(s):  
Hsiangtsai Chiang
Keyword(s):  
Side Effects ◽  
Agency Costs ◽  
Audit Quality ◽  
Agency Conflicts ◽  
Demand Side ◽  
Minority Shareholders ◽  
Audit Firms ◽  
The Impact ◽  
Selection Of

This study contributes to the literature on company audits by examine the demand-side effects of the selection of industry-specialist audit firms and auditors; it does this by considering the impact of the agency problem that exists between controlling owners and minority shareholders. It is shown that the potential magnitude of the agency costs associated with interest entrenchment increases the demand for auditors whose audit quality is perceived to be higher with regard to the signaling role of audits, but decreases the probability of engaging individual specialist auditors who actually carry out higher quality audits with regard to substantial monitoring.

scholarly journals Agency Conflicts, Socioemotional Wealth, and the Debt Maturity Structure of Family Firms: A Critical Analysis

2017 ◽  
Vol 9 (9) ◽  
pp. 40
Author(s):  
Oscar Domenichelli
Keyword(s):  
Family Firms ◽  
Family Businesses ◽  
Debt Maturity ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Socioemotional Wealth ◽  
Maturity Structure ◽  
International Importance ◽  
Specific Factors ◽  
The Impact

This paper aims to study the impact of the distinctive agency and socioemotional features of family firms on their debt maturity choices using a literature analysis of this topic, still substantially unexplored. Therefore, the paper examines the relationships between owners and managers; majority and minority shareholders, and family shareholders and family outsiders; and owners and creditors. The analysis suggests that the propensity of family businesses to use long-term debt depends on the generation leading the family firm, family blockholders, motivation for expropriating minority shareholders, family outsiders and their socioemotional orientation. Much still remains to be empirically studied. One interesting issue to explore further would be the influence of country-specific factors worldwide, in combination with firm-specific characteristics relating to agency conflicts and socioemotional wealth, on the debt maturity decisions of family firms, compared to non-family ones. Given the international importance of family firms, and their widespread presence and activity worldwide, additional empirical results on this topic may help governments adopt specific policies, that will better support family businesses, in light of their peculiar and unique economic and non-economic aspects.

Debt policy and firm performance of family firms: the impact of economic adversity

2017 ◽  
Vol 13 (3) ◽  
pp. 267-286 ◽  
Author(s):  
Elisabete Simões Vieira
Keyword(s):  
Firm Performance ◽  
Family Firms ◽  
Negative Relationship ◽  
Small Sample ◽  
Minority Shareholders ◽  
Content Type ◽  
And Performance ◽  
The Impact ◽  
The Relationship ◽  
Debt Policy

Purpose The purpose of this paper is to analyse the relationship between debt policy and performance among family firms (FF), providing evidence on whether FF differ from non-family firms (NFF). It also focusses on the possibility of asymmetrical debt policy impact on performance between periods of stability and economic adversity. Design/methodology/approach The paper employs panel data regression, considering a sample of Portuguese listed firms for the period between 1999 and 2014. Findings Overall, the author find evidence that debt contributes negatively to firms’ performance, which is consistent with the pecking order prediction, and that the relationship between debt and performance do not differ significantly between FF and NFF. After addressing the endogeneity issue, the author conclude that firms’ performance is negatively influenced by both short- and long-term debt. Considering the total debt, the negative relationship between the two variables differs from family and non-family companies. The results show that age and size influences positively, and the independence of the board directors influences negatively the firms’ performance. The empirical findings suggest that under economic adversity, the firms’ performance is negatively affected. Finally, the author conclude that return on assets appear to fit better than return on equity or MB when you want to relate debt and firm performance. Research limitations/implications A limitation of this study is the small size of the Euronext Lisbon that results in a small sample. Originality/value This paper offers some insights on the relationship between debt policy and firm performance from a country with weak protection of minority shareholders, concentrated ownership and a significant family control. It also gives the opportunity to analyse whether firm performance differs according to market conditions.

Does family ownership matter in executive pay design?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Subba Reddy Yarram ◽  
Sujana Adapa
Keyword(s):  
Executive Compensation ◽  
Family Firms ◽  
Family Businesses ◽  
Executive Pay ◽  
Minority Shareholders ◽  
Content Type ◽  
Financial Outcomes ◽  
Optimal Contracting ◽  
Managerial Power ◽  
And Performance

PurposeThe purpose of this study is to analyse the level and structure of executive compensation of family and non-family businesses and if minority shareholders are expropriated by family businesses in the Australian context using excessive pay. Studies on compensation practices of family businesses are limited to the European and North American contexts. This study, for the first time, considers the Australian context, which is unique with its transparent compensation disclosures, and a principle-based corporate governance framework to examine the level of compensation as well as the association between pay and performance.Design/methodology/approachA set of family and matched non-family firms for the period 2004–2014 are examined in a panel data setting. Robust models are estimated to examine the association between compensation and a set of economic, governance and ownership factors.FindingsThis study finds evidence that family businesses in general pay lower levels of compensation than non-family businesses. An investigation of the role of economic factors on compensation of family and non-family businesses shows evidence that supports the optimal contracting theory. Further examination of governance factors on compensation levels and pay–performance sensitivities shows there is a limited role for managerial power approach in explaining the executive compensation practices of family businesses in Australia. These findings infer that family businesses, given their interest in non-financial goals, do not pay excessive compensation to their executives to expropriate minority shareholders.Research limitations/implicationsThese findings have implications for theory relating to executive compensation and human resource management in all types of businesses, including family firms. These findings offer support for the theory of optimal contracting. Empirical analysis shows no evidence of entrenchment effect or managerial power in family businesses in Australia. In terms of theory-building, there is role for socioemotional wealth model in addition to optimal contracting theory and managerial power approach.Practical implicationsThe findings of this study also have implications for practice. Compensation practices may be designed in such a way that executives and firms pursue broader social goals such as the sustainable development goals or more generally non-financial objectives. Businesses may not necessarily use only financial outcomes when assessing appropriate level of pay of executives. Often, the financial outcomes may involve wealth transfers between different stakeholders and may not necessarily lead to improving the societal well-being. In terms of human resource management, the findings of this study emphasise the need for explicit consideration of socioemotional wealth of all family-related and non-related employees when designing recruitment, training, reward and recognition policies.Originality/valueThis study highlights the role non-financial factors play in executive pay setting processes in family businesses in a highly transparent and principle-based governance framework. Family businesses in Australia are not motivated by monetary considerations, and that their interest in non-financial objectives leads to less emphasis on the link between compensation and performance.

Corporate governance and information asymmetry between shareholders and lenders: an analysis of Italian listed companies

2016 ◽  
pp. 27-53
Author(s):  
Sabrina Pisano ◽  
Luigi Lepore ◽  
Rocco Agrifoglio
Keyword(s):  
Corporate Governance ◽  
Information Asymmetry ◽  
Agency Costs ◽  
Audit Committee ◽  
Independent Directors ◽  
Agency Conflicts ◽  
Minority Shareholders ◽  
Controlling Shareholder ◽  
Corporate Governance Mechanisms ◽  
Agency Costs Of Debt

This paper analyzes the information asymmetry between owner/manager and lenders. More specifically, the research investigates the role of corporate governance mechanisms in reducing the agency costs of debt. The findings show that lenders perceive higher agency costs of debt if the controlling shareholder owns a percentage of capital greater than 66%. Results also show that the presence of independent directors elected by minority shareholders on the board mitigates the agency conflicts between borrowers and lenders. In the same way, the audit committee independence reduces the agency costs of debt. Moreover, the study shows that when the audit committee chairman coincides with the board chairman banks perceive more risk and, therefore, a bigger asymmetry. This coincidence increases the concentration of power in the hands of just one person and this enhances the likelihood of opportunistic actions by the management that could damage lenders. This means that it is costly for companies to concede to just one person too much influence over the board activities, because it reduces the effectiveness of the monitoring role played by independent directors, increasing the information asymmetry between borrowers and lenders.

Trace nanoanalysis

1994 ◽  
Vol 52 ◽  
pp. 940-941
Author(s):  
D. E. Newbury ◽  
R. D. Leapman
Keyword(s):  
High Performance ◽  
Secondary Ion Mass Spectrometry ◽  
Detection Efficiency ◽  
Volume Element ◽  
And Performance ◽  
Trace Constituents ◽  
Secondary Ion ◽  
Concentration Levels ◽  
Structure Properties

Trace constituents, which can be very loosely defined as those present at concentration levels below 1 percent, often exert influence on structure, properties, and performance far greater than what might be estimated from their proportion alone. Defining the role of trace constituents in the microstructure, or indeed even determining their location, makes great demands on the available array of microanalytical tools. These demands become increasingly more challenging as the dimensions of the volume element to be probed become smaller. For example, a cubic volume element of silicon with an edge dimension of 1 micrometer contains approximately 5×1010 atoms. High performance secondary ion mass spectrometry (SIMS) can be used to measure trace constituents to levels of hundreds of parts per billion from such a volume element (e. g., detection of at least 100 atoms to give 10% reproducibility with an overall detection efficiency of 1%, considering ionization, transmission, and counting).

Board Effectiveness: An Evaluation based on Corporate Governance Score

Think India ◽  
2015 ◽  
Vol 18 (1) ◽  
pp. 16-23
Author(s):  
Hitesh Shukla ◽  
Nailesh Limbasiya
Keyword(s):  
Corporate Governance ◽  
Good Governance ◽  
Sustainable Growth ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Effective Governance ◽  
Performance Orientation ◽  
Corporate Governance Mechanism ◽  
And Performance ◽  
Ethical Governance

Growth, progress, and prosperity of any country depend highly on the corporate governance mechanism of that country. Good governance of a country helps it to sustainable growth and consistency in progress. The good governance should contribute towards the improvement in transparency, ethics, morality, and disclosure. The principles of good governance stand on honesty, trust, integrity, openness, and performance orientation. Our honorable Prime Minister Narendra bhai Modi had given the three E for good governance during his speech on Independence Day i.e. Effective Governance, Electronic Governance, and Ethical Governance. The fundamental concern of corporate governance mechanism is to ensure the protection of minority shareholders/owners of specific firms. Mechanism of a corporate governance specifies the relations among the shareholders, board of directors, and managers. The present paper is an attempt to evaluate the effectiveness of the board by calculating the corporate governance score. The mandatory and non-mandatory guidelines have been considered while assigning points to specific parameters of the corporate governance.

https://imsciences.edu.pk/files/journals/vol12_2/New%201%20MA.864.pdf

2020 ◽  
Vol 12 (2) ◽  
pp. 19-50 ◽  
Author(s):  
Muhammad Siddique ◽  
Shandana Shoaib ◽  
Zahoor Jan
Keyword(s):  
Organizational Performance ◽  
Structural Equation ◽  
High Performance ◽  
Service Sector ◽  
Performance Outcomes ◽  
Theory And Practice ◽  
Relational Coordination ◽  
Multiple Sources ◽  
And Performance ◽  
High Level

A key aspect of work processes in service sector firms is the interconnection between tasks and performance. Relational coordination can play an important role in addressing the issues of coordinating organizational activities due to high level of interdependence complexity in service sector firms. Research has primarily supported the aspect that well devised high performance work systems (HPWS) can intensify organizational performance. There is a growing debate, however, with regard to understanding the “mechanism” linking HPWS and performance outcomes. Using relational coordination theory, this study examines a model that examine the effects of subsets of HPWS, such as motivation, skills and opportunity enhancing HR practices on relational coordination among employees working in reciprocal interdependent job settings. Data were gathered from multiple sources including managers and employees at individual, functional and unit levels to know their understanding in relation to HPWS and relational coordination (RC) in 218 bank branches in Pakistan. Data analysis via structural equation modelling, results suggest that HPWS predicted RC among officers at the unit level. The findings of the study have contributions to both, theory and practice.

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