nep-cfn New Economics Papers
on Corporate Finance
Issue of 2009‒03‒14
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Does family ownership impact positively on firm value? Empirical evidence from Western Europe By Pindado, Julio; Requejo, Ignacio; Torre, Chabela de la
  2. Control Rights, Pyramids, and the Measurement of Ownership Concentration By Edwards, Jeremy S S; Weichenrieder, Alfons J

  1. By: Pindado, Julio (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Requejo, Ignacio (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Torre, Chabela de la (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca)
    Abstract: Given the importance of family firms all over the world, our main objective is to study whether ownership concentration in the hands of family owners contributes to increase the market value of the firm. Additionally, we analyze whether family firms outperform nonfamily corporations. The estimation of our models by using the Generalized Method of Moments provides interesting results. We find that family ownership positively impacts on firm value. Nevertheless, when ownership concentration in the hands of the family is too high, firm value decreases; thus giving rise to a non-linear relation between family ownership concentration and firm value. Moreover, our results show that young family firms perform better than old ones. Finally, we find that family firms are superior performers to non-family ones, even when nonlinearities are taken into account; but the better performance is primarily due to young family corporations. Overall, the empirical evidence provided supports a positive impact of family ownership on firm value, supporting the idea that family control may be beneficial to minority shareholders
    Keywords: family firm, ownership concentration, firm value.
    JEL: G32
    Date: 2008–04
  2. By: Edwards, Jeremy S S; Weichenrieder, Alfons J
    Abstract: The recent corporate governance literature has emphasised the distinction between control and cash-flow rights but has disregarded measurement issues. Control rights may be measured by immediate shareholder votes, the voting rights as traced through ownership chains, or voting power indices that may or may not trace ownership through chains. We compare the ability of various measures to identify the effects of ownership concentration on share valuation using a German panel data set. The widely-used weakest link principle does not perform well in this comparison. Furthermore, measures that trace control through ownership chains do not outperform those that rely on immediate ownership, thus questioning the role of pyramids in the separation of control and cash-flow rights. The paper emphasises that there is a distinction between these two aspects of ownership even without pyramids or preferred stock, identification of which requires measures that, like the Shapley-Shubik index, do not simply equate control rights with voting rights.
    Keywords: Control rights; Cash-flow rights; Pyramids; Ownership structure
    JEL: G34 G32
    Date: 2009–01–14

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