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When Does the Family Govern the Family Firm?

Published online by Cambridge University Press:  19 September 2018

Øyvind Bøhren ,
Bogdan Stacescu ,
Line F. Almli  and
Kathrine L. Søndergaard
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Abstract

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We find that the controlling family holds both the chief executive officer and chair positions in 79% of Norwegian family firms. The family holds more governance positions when it owns large stakes in small, profitable, low-risk firms. This result suggests that the family trades off expected costs and benefits by conditioning participation intensity on observable firm characteristics. We find that the positive effect of performance on participation is twice as strong as the positive effect of participation on performance. The endogeneity of participation, therefore, should be carefully accounted for when analyzing the effect of family governance on the family firm’s behavior.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 54 , Issue 5 , October 2019 , pp. 2085 - 2117
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

Footnotes

1

We acknowledge valuable comments from Janis Berzins, Tom Colbjørnsen, Jeffrey Coles (the referee), Alex Edmans, Jarrad Harford (the editor), Rune J. Sørensen, Danielle Zhang, and seminar participants at BI, University of Edinburgh, University of Gothenburg, and the 2015 Workshop on Corporate Governance and Investment at the University of Manchester. We are very grateful to Janis Berzins for data on family size.

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