Are Family Members Expropriated-Monitoring Shareholders? Non-Linear Evidence from the Saudi Arabia (original) (raw)
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Family Ownership, Corporate Governance and Performance: Evidence from Saudi Arabia
International Journal of Economics and Finance, 2015
The main objective of this study is to examine the performance of companies listed in the Saudi Stock Exchange. For this purpose, we studied and tested a sample of 792 firm-years among from 11 industrial groups for the years 2006 to 2013 and compared Family and Non-family firms. The research addresses the questions 1) Do family owned firms perform better? 2) How does concentration of ownership affect firm performance, comparing family firms to non-family ones? This research attempts to fill a research gap on the relationship or determinants of capital structure in one of the emerging markets, Saudi Arabia. This study will be implemented through a quantitative approach. Secondary data were obtained from published annual statistical data, from the company financial reports and the DataStream database.
International Journal of Management and Sustainability, 2015
The current study attempts to investigate the impact of family ownership structure on value of firms listed at the Karachi Stock Exchange (KSE) of Pakistan. For the distinction of FOB from Non-FOB, two threshold points (25% & 50%) of ownership structure are used. A sample of 280 listed firms at KSE is collected ranging for the period 2002-13. Generalized Method of Moments (GMM) is applied on panel data to estimate the coefficients of variables. The empirical results indicate that the family firms outperform the non-family ones. The better performance of young generation of family firms over succeeding generation is also revealed but professional chief executive officer (CEO) over family member is preferred. Furthermore, this study discovers inflection points i.e. (62% & 57%) for family and non-family firms under quadratic specification respectively.
Th e current study attempts to investigate the impact of family ownership structure on investment decisions of fi rms listed at the Karachi Stock Exchange (KSE) of Pakistan. For distinguishing family owned business (FOB) from non-family (NFOB), two threshold points of ownership structure (25% & 50%) were used. Panel data forms ranging from the period 2002-2013 were collected from diff erent sources such as annual reports of fi rms, fi nancial statements, business recorder, stock exchanges, telephone calls, emails and balance sheet analyses of joint stocks. Generalized Method of Moments (GMM) was applied to estimate the coeffi cients of variables of interest. Empirical results revealed that there was stronger positive impact of cashfl ow on investment in NFOBs in comparison with FOBs. Conversely, family fi rms have lower investment-cashfl ow sensitivity even when blockholder's eff ect was taken in consideration. Th e estimated coeffi cients confi rmed less investment-cash fl ow sensitivity in those fi rms comparatively where professional manager serves as a chief executive offi cer (CEO). It was also revealed that family fi rms alleviate fi nancial constraints as well as free cash fl ow problems. It was concluded that broader investment horizons, corporate governance mechanism and fl exibility to manage fi nancial constraints make family fi rms capable of reducing investment-cash fl ow sensitivity.
Does Family Involvement in Ownership Affect Profitability and Value of Egyptian Corporations?
The Academic Journal of Contemporary Commerical Research, 2022
This study aimed to investigate the effect of family involvement in ownership (FIO) on profitability and value based on a sample of Egyptian corporations. Firm profitability and market valuation were measured by return on total assets (ROA) and Tobin's Q ratio (TQ), respectively. A panel data analysis for 67 Egyptian firms for the period 2010-2018 was employed, and the generalized method of moments (GMM) with fixed-effects estimator was applied to confirm the veracity of the study hypothesis. The research findings demonstrated that profitability and firm value is positively affected by FIO. Hence, the higher the level of FIO, the higher the profitability and market valuation of the firm. The implications of the current research highlight the vital role of FIO as a primary source of equity finance in modern corporations.
This study evaluates the impact of family ownership on the firm's performance during 2004 and 2009 considering a sample of 29 manufacturing firms listed at KSE-100 index in the Pakistani capital market. The dependent variable is performance which is measured by Return on Asset (ROA), Return on Equity (ROE) and Tobin's Q of the sample firm and the independent variable is family ownership. Linear regression model is used for estimation along correlation analysis. The study reported positive relation between the ownership variable and performance variables. The results indicate negative association between the ownership variable and firm's dividend payment, concluding that family control firms prefer to retain earning and investment opportunities rather to distribute the earnings. The empirical analysis reveal that the overall better governance practices have positive affect on financial decisions. However, the firms with more family ownership do not adopt good practices and disclose less.
Does Ownership Matter? A Study of Family and Non Family Firms in Pakistan
Problems of Management in the 21st Century, 2011
Researchers have been trying to find out whether ownership makes any difference to a firm’s performance. The purpose of this article is to analyse whether family or non-family firms perform better. It focuses on comparison only and does not indulge in finding out reasons of the results. A sample of 100 randomly selected firms from Karachi Stock Exchange (KSE), Pakistan were examined for six years (2004-2009). Ownership variable is taken as a dummy variable besides two other independent variables: age and size. Return on Asset (ROA), Return on Equity (ROE) and Tobin’s Q are used to measure firm performance. Fixed Effect Model along with statistical analysis were used to examine the effects of the variables. The statistical analysis showed that non-family firms had greater mean values for performance variables. Correlation matrix showed that the size of a firm will be small in case a family is running it. The correlation coefficient between family ownership and age is also negative. F...
Family Firms, Expropriation and Firm Value: Evidence from Related Party Transactions in Malaysia
The Journal of Developing Areas, 2015
We examine the relationship between related party transactions (RPTs) and firm value and how this relationship is moderated by ownership concentration using a sample of 379 listed family and 151 non-family firms for the period 2007 to 2009. Ordinary Least Square Pooled Model as well as Fixed Effects Model panel data regressions are used in the data analysis. For family firms, we find that RPTs reduce firm value (proxied by Tobin’s Q and market-to-book value). Further, controlling shareholders’ ownership has a significant positive moderating effect on this relationship. However, for non-family firms, there is no significant evidence of firm value reduction and positive moderating effect respectively. We conclude that expropriation via RPTs is stronger in family firms compared to non-family firms. Additionally, an increase in controlling shareholders’ ownership helps mitigate this expropriation and this mitigating effect is stronger in family firms compared to non-family firms. The implications for the capital market regulator are discussed in this paper.
The Effect of Group and Family Ownership on Firm Performance: Empirical Evidence from Pakistan
Since previous studies have found ownership structure to be endogenously determined, we account for this problem by using two 2SLS technique. This paper contributes to the extant literature as it uses a larger sample of 158 firms and the 2SLS technique; existing studies on this topic in Pakistan lack both of these aspects. Results of the OLS and 2SLS regressions show that group ownership in a firm has no significant impact on a firm's performance. However, when group ownership is significantly higher in a firm, the given firm performs poorly. This is an indication of some sort of expropriation of the minority shareholders. Moreover, the analysis shows that larger firms, firms with higher sales-turnover ratio and growing firms performe better than other firms. Firms with higher financial leverage show poor financial performance. For comparing the performance of family and non-family firms, a sample of 28 family and 26 non-family firms listed on Karachi Stock Exchange is used. The results of two sample t-tests show that mean Tobin's Q of family firms is economically larger than non-family firms; though the difference is statistically insignificant. Accounting-based measures such as return on assets, assets turnover, and profit margin show similar statisticsthe statistical differences are negligible between family and non-family firms.
The current study aims to inspect the investment policy as well as financing policy with respect to ownership structure. Two threshold points of ownership structure (25% & 50%) were used to distinguishing family owned business (FOB) from the non-family (NFOB) ones. The data sample of 280 listed firms at Karachi Stock Exchange (KSE) was collected from different sources like annual reports, financial statements and balance sheet analyses ranging for the period 2002-2013. Among many advance econometric techniques, Generalized Method of Moments (GMM) was found appropriate to estimate the coefficients of variables. The empirical results showed that the FOBs had lower investment-internal fund sensitivity than NFOBs. However, the blockholder's effect on investment-internal fund sensitivity was found statistically insignificant. Furthermore, the weak application of Pecking Order Theory and higher payout ratio in FOBs as compared to NFOBs were revealed. Also, It was concluded that the lower agency and information asymmetry problems in FOBs comparatively.
Family Ownership and Corporate Performance
Jurnal Akuntansi dan Pajak
The paper aims to investigate whether family ownership as controlling shareholder effect on firm performance. This paper uses ultimate (direct and indirect) ownership to identify a listed firm owned by family or non-family. Family ownership is majority shareholder for listed companies in Indonesia. Family ownership will be good impact (competitive advantage) or bad impact (private benefit) on companies. The study also motivates to study this topic because investigating on family ownership as controlling shareholder is limited in Indonesia. The study uses panel data or pooled data. The method for collecting data is archival. Unit of analysis of the study is organization. Sample of this study is 604 observations during 2001-2007. This study uses purposive sampling to collect data from the Indonesian Stock Exchange. This study collects and searches ultimate ownership on chain of ownership structure in manufacturing companies listed in the Indonesian Stock Exchange. This study uses ulti...