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Small Business Economics

Erschienen in:

01.08.2013

Inherited corporate control and returns on investment

verfasst von: Johan Eklund, Johanna Palmberg, Daniel Wiberg

Erschienen in: Small Business Economics | Ausgabe 2/2013

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Abstract

This paper contributes to the literature on management in family firms by investigating how succession in family firms affects returns on investment. The identities of the chief executive officer (CEO) and the chairman of the board (COB) were used to establish whether the management of the firm can be characterized as founder, descendant, or external management. A unique, unbalanced panel data set on listed Swedish firms covering the period from 1990 to 2005 was used in the analysis. The results show that founder management has a positive effect on the returns on investment in family firms, whereas descendant management has a negative impact. An external CEO as a successor in family firms leads to more efficient investment policies with increased firm value as a result. That is, when studying corporate governance in family firms it is important to account for what type of management the firm has. Further studies are required to understand the relationship between ownership, control, management, and firm performance.

Vorheriger Artikel The global financial crisis and small- and medium-sized enterprises in Japan: how did they cope with the crisis?

Nächster Artikel Long-term debt maturity and financing constraints of SMEs during the Global Financial Crisis

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Bianco et al. (2012) and Bjuggren and Palmberg (2010) are two recent exceptions. Bianco et al. (2012) studied investment decisions in family firms while Bjuggren and Palmberg used an approach similar to the one employed in this paper, investigating the role of family control on investment performance.

In this study, a firm is considered to be a family firm if the controlling owner is the founder, a descendant of the founder or another member of the founder’s family with 20 % control (see Sect. 3.2 for further discussion of the definition of family firms).

Villalonga and Amit (2010) refer to these benefits and costs as “competitive advantages” and the “private benefits of control.” Bertrand and Schoar (2006) refer to “efficiency based theories” and “cultural views” as reasons for family ownership and control. According to the cultural view, the focus shifts from value to utility maximization for the founding family (see p. 75 for further discussion).

See Burkart et al. (2003) for a formal description of the concept of “amenity potential” and a more detailed description of how it differs from the private “benefits of control.” The main difference is that the private benefits of control are costly for the firm’s minority shareholders.

For a discussion of measurement problems associated with Tobin’s q see Lewellen and Badrinath (1997).

See Gugler et al. (2004b, p. 513) for a detailed discussion on the concepts of infra-marginal and marginal returns on capital.

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Titel: Inherited corporate control and returns on investment
verfasst von: Johan Eklund
Johanna Palmberg
Daniel Wiberg
Publikationsdatum: 01.08.2013
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 2/2013
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-012-9432-1

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