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>

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 Does family involvement on board of the directors contribute to firm profitability? An empirical evidence from Saudi Arabia

2015 ◽  
Vol 11 (2) ◽  
pp. 159-170 ◽  
Author(s):  
Shehabaddin Abdullah A. Al-Dubai ◽  
Ku Nor Izah Ku Ismail ◽  
Noor Afza Amran
Keyword(s):  
Time Series ◽  
Saudi Arabia ◽  
Empirical Evidence ◽  
Family Involvement ◽  
Family Firms ◽  
Cross Sectional ◽  
Listed Firms ◽  
Firm Profitability ◽  
The World ◽  
Promising Area

Literatures view board of the directors as the cornerstone of firm’s success. Therefore, family involvement on the board and its impact on firm profitability is an issue of interest and need to be addressed. The purpose of this paper lies in the fact that it extracts new empirical evidence from a promising area in the world. The study proceeds with a cross-sectional time-series analysis based on a data of 75 Saudi non-financial public listed firms from 2007-2011(375 firm-year observations) to examine family representing on board of the directors, family chairman, and founder chairman and its impact on firm performance (ROA). The study concludes the outperformance of firms in which family represents heavily on the board. In addition, the results suggest that not all family members are good stewards. Strictly speaking, founder chairman only found to be beneficial to the firm profitability rather than others. However, the results confirmed its robustness against different indicator (EPS) and when family firms only being selected.

scholarly journals The Effect of the Board Composition on Dividends: The Case of Brazilian and Chilean Family Firms

2020 ◽  
Vol 10 (2) ◽  
pp. 43-60
Author(s):  
Guadalupe C. Briano-Turrent ◽  
Karen Watkins-Fassler ◽  
Martha L. Puente-Esparza
Keyword(s):  
Dividend Policy ◽  
Family Firms ◽  
Positive Impact ◽  
Board Composition ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Listed Firms ◽  
The Family ◽  
Negative Effect ◽  
Corporate Governance Mechanism

Based on the agency theory, this paper analyzes whether family firms pay more dividends compared to no-family firms and identifies whether the board composition affects the dividend policy. Brazil and Chile have established mandatory dividends, retain lower cash holdings, pay higher dividends compared with other markets in the region. The sample of study is composed by 853 observations from 49 Brazilian and 32 Chilean top publicly listed firms in terms of market capitalization over the 11-year period from 2004 to 2014. Using an unbalanced panel data, results indicate that family controlled firms distribute more dividends and board composition namely; board size and the proportion of women on the board have a significant and positive impact on the dividend policy of the firm. By contrast, COB-CEO duality has a negative effect. Thus, dividend policy constitutes an effective corporate governance mechanism in mitigating the family’ expropriation of minority shareholders’ wealth.

scholarly journals Do family firms pay less for external funding?

2021 ◽  
pp. 031289622110182
Author(s):  
Muhammad Jahangir Ali ◽  
Seema Miglani ◽  
Man Dang ◽  
Premkanth Puwanenthiren ◽  
Mazur Mieszko
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Jel Classification ◽  
Family Control ◽  
Listed Firms ◽  
Family Enterprises ◽  
The Cost ◽  
And Control ◽  
The Impact

We examine the impact of family control on the cost of raising external funds by family enterprises. Using a sample of Australian publicly listed firms, we find a significantly negative relation between cost of newly raised capital and family control. Moreover, we show that this relationship varies with the quality of corporate governance and the quality of firm’s information environment. Furthermore, we conduct several robustness checks and consistently find that our main results remain unchanged. Overall, our evidence suggests that family firms have easier access to external financing fostered by family involvement in the ownership and control. JEL Classification: G31; G32; M41; M42

scholarly journals The influence of family board involvement on earnings management

2021 ◽  
Vol 18 (2) ◽  
pp. 106-123
Author(s):  
Fabio Franzoi ◽  
Mark Mietzner ◽  
Franziska Thelemann
Keyword(s):  
Earnings Management ◽  
Family Involvement ◽  
Family Firms ◽  
Management Practices ◽  
Real Earnings Management ◽  
Family Management ◽  
Family Ownership ◽  
Executive Board ◽  
Listed Firms ◽  
Founding Family

This study explores the influence of family ownership and family board involvement on earnings management in German-listed firms. We extend existing research by applying a more precise measurement of family involvement that offers new insights into a family’s effect on earnings management behaviour. Our models suggest that the degree of management involvement of families is a significant driver of earnings management, a factor disregarded so far in the literature. Furthermore, the distinction between founding family and family ownership should be carefully considered. Employing a sample of 278 firms from 2000-2013, we find that greater family management presence on the executive board is associated with more earnings-decreasing accrual-based earnings management practices and more real earnings management activities via discretionary expenses. This is viewed as less value-destroying REM activity to meet earning targets. Overall, German family firms seem to use their powerful positions as shareholders and executive board members to expropriate shareholders and manage earnings to meet targets while maintaining family wealth

scholarly journals Diversified, integrated and cross-border acquisitions and firm performance: A comparison of family and non-family Italian listed firms

2018 ◽  
Vol 16 (1) ◽  
pp. 72-86 ◽  
Author(s):  
Fabio La Rosa ◽  
Francesca Bernini ◽  
Giovanna Mariani
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Global Financial Crisis ◽  
Target Selection ◽  
Family Ownership ◽  
Listed Firms ◽  
And Performance ◽  
The Global Financial Crisis ◽  
External Growth

In family firms, the principal-agent relationship and the steward role of family managers are determinants for external growth and acquisition target selection. In fact, some acquisitions are better for the family’s need for risk reduction and company preservation. We aim to verify if family involvement in ownership and management influences firms’ acquisition propensity, type of strategy, and post-deal performance. We develop an empirical analysis for a sample of 141 Italian listed companies during 2005–2011, which includes the global financial crisis. Our results reveal that Italian listed family firms have lower acquisition propensity than non-family firms because of family involvement in ownership and executive committees. Especially, diversifying strategies are less pursued by family firms, and this is corroborated when family ownership increases. However, while family firms do not differ from non-family firms on post-acquisition performance, a moderating role of family firms and family ownership does exist for diversified acquisitions and performance.

Family Firms in the Ownership Network: Clustering, Bridging, and Embeddedness

2018 ◽  
Vol 43 (2) ◽  
pp. 330-351 ◽  
Author(s):  
Dalhia Mani ◽  
Rodolphe Durand
Keyword(s):  
Family Involvement ◽  
Community Involvement ◽  
Family Firms ◽  
Analytical Framework ◽  
Network Clustering ◽  
Corporate Ownership ◽  
Group Affiliation ◽  
Listed Firms ◽  
Business Group Affiliation ◽  
Longitudinal Dataset

In this article, we investigate family firms' position in the intercorporate ownership network. Rooting our predictions in the Behavioral Agency Model and a Network analytical framework, we predict and find that family involvement decreases the likelihood of business group affiliation and of cross-group ties leading to a lower embeddedness within the overall network. We predict and find the opposite effect for community involvement. We use the complete longitudinal dataset of publicly listed firms' corporate ownership ties in India (2001, 2005, and 2009). Theoretical and substantive contributions are to research on family businesses and to research on interorganizational networks.

scholarly journals Earning quality in listed firms: How much an active family governance is desirable?

2012 ◽  
Vol 10 (1) ◽  
pp. 681-691 ◽  
Author(s):  
Riccardo Tiscini ◽  
Francesca di Donato
Keyword(s):  
Family Involvement ◽  
Family Firms ◽  
Earnings Quality ◽  
Listed Firms ◽  
Family Governance ◽  
The Family ◽  
Governance Practices ◽  
Earning Quality ◽  
Italian Context ◽  
The Relationship

The study investigates the relationship between family involvement in the governance of Italian listed companies and earnings quality (EQ). Family firms set incentives to extract private benefits (‘entrenchment’ effect), but, they also contribute to higher alignment between owners and managers (‘alignment’ effect). The literature shows mixed results about the relationship between EQ and family firms. We argue that family involvement in the governance affects EQ. The empirical evidence shows that in the Italian context, there is higher EQ in case of higher family involvement in the board, but only if the CEO is not belonging to the controlling family. On the contrary, in case of a family CEO, the higher family involvement in the board increases his entrenchment, reducing EQ. The results are valuable because we find that EQ in family firms is affected both by family ownership and by the attitude of the family toward governance practices.

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.

The effects of goals attainment on CEO-owner satisfaction and the role of family involvement

2019 ◽  
Vol 10 (2) ◽  
pp. 116-127
Author(s):  
Ondřej Machek ◽  
Jiří Hnilica
Keyword(s):  
Family Involvement ◽  
Family Business ◽  
Firm Value ◽  
Family Firms ◽  
Hierarchical Regression ◽  
Content Type ◽  
Business Goals ◽  
Growth Increase ◽  
The Family ◽  
Owner Satisfaction

Purpose The purpose of this paper is to examine how the satisfaction with economic and non-economic goals achievement is related to the overall satisfaction with the business of the CEO-owner, and whether family involvement moderates this relationship. Design/methodology/approach Based on a survey among 323 CEO-owners of family and non-family businesses operating in the Czech Republic, the authors employ the OLS hierarchical regression analysis and test the moderating effects of family involvement on the relationship between the satisfaction with different goals attainment and the overall satisfaction with the business. Findings The main finding is that family and non-family CEO-owner’s satisfaction does not differ significantly when economic goals (profit maximisation, sales growth, increase in market share or firm value) and firm-oriented non-economic goals (satisfaction of employees, corporate reputation) are being achieved; both classes of goals increase the overall satisfaction with the firm and the family involvement does not strengthen this relationship. However, when it comes to external non-economic goals related to the society or environment, there is a significant and positive moderating effect of family involvement. Originality/value The study contributes to the family business literature. First, to date, most of the studies focused on family business goals have been qualitative, thus not allowing for generalisation of findings. Second, there is a lack of evidence on the ways in which family firms integrate their financial and non-financial goals. Third, the authors contribute to the literature on the determinants of personal satisfaction with the business for CEOs, which has been the focus on a relatively scarce number of studies.

Sign in / Sign up

Export Citation Format

Share Document