Founding Family Ownership and Firm Performance: Evidence from the S&P 500
Founding-Family Ownership and Firm Performance: Evidence from the S&P 500
The main argument of this paper by Anderson and Reeb is the question whether family ownership is beneficial or detrimental to the future of the company. The arguments against family ownership stress on the points of forgoing profit, limited human resource pool, usage of company resources for personal reasons and general low company performance. Other researchers attribute benefits to family ownership like greater monitoring of the firm, increased motivation as personal fortunes are tied to it, specialized knowledge and increased investment horizons. This paper supports family ownership. Using S&P 500 index, they have split the paper into the following categories: - Section I presents arguments on the impact of family ownership and influence in public firms. Section II discusses the data and provides summary statistics. In Section III, empirical results are provided. Section IV explores the robustness of the results, and Section V provides a summary and concludes the paper.
Section 1 starts by describing the drawbacks of family ownership. Fama and Jensen argue that family ownership tends to deviate the firm’s target from increasing shareholder worth to personal goals like firm continuity and technological innovations etc. Another argument that runs is that family ownership entrenches management and reduces the firm value and the possibility of takeovers. Special dividends and personal benefit are a very popular argument against family ownership.
We now look at the potential benefits of family ownership. Family ownership may lead to them having a competitive advantage and as their personal fortunes are attached to the firm they will always run the firm to its maximum potential and increase its value. This also helps to eliminate the free rider problem. Researchers have pointed out that family run firms have longer investment horizons and this avoids investment myopia. Lastly, the fact
The main argument of this paper by Anderson and Reeb is the question whether family ownership is beneficial or detrimental to the future of the company. The arguments against family ownership stress on the points of forgoing profit, limited human resource pool, usage of company resources for personal reasons and general low company performance. Other researchers attribute benefits to family ownership like greater monitoring of the firm, increased motivation as personal fortunes are tied to it, specialized knowledge and increased investment horizons. This paper supports family ownership. Using S&P 500 index, they have split the paper into the following categories: - Section I presents arguments on the impact of family ownership and influence in public firms. Section II discusses the data and provides summary statistics. In Section III, empirical results are provided. Section IV explores the robustness of the results, and Section V provides a summary and concludes the paper.
Section 1 starts by describing the drawbacks of family ownership. Fama and Jensen argue that family ownership tends to deviate the firm’s target from increasing shareholder worth to personal goals like firm continuity and technological innovations etc. Another argument that runs is that family ownership entrenches management and reduces the firm value and the possibility of takeovers. Special dividends and personal benefit are a very popular argument against family ownership.
We now look at the potential benefits of family ownership. Family ownership may lead to them having a competitive advantage and as their personal fortunes are attached to the firm they will always run the firm to its maximum potential and increase its value. This also helps to eliminate the free rider problem. Researchers have pointed out that family run firms have longer investment horizons and this avoids investment myopia. Lastly, the fact