When Does the Family Govern the Family Firm?. (October 2019)

• Record Type: Journal Article
• Authors: Bøhren, Øyvind; Stacescu, Bogdan; Almli, Line F.; Søndergaard, Kathrine L.
• Is Part Of: Journal of financial and quantitative analysis. Volume 54:Number 5(2019)
• Page Start: 2085
• Page End: 2117
• Publication Date: 2019-10
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109018001102
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : 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.