Ownership and performance in the Italian stock exchange: the puzzle of family firms
- PDF / 961,689 Bytes
- 31 Pages / 439.37 x 666.142 pts Page_size
- 11 Downloads / 202 Views
Ownership and performance in the Italian stock exchange: the puzzle of family firms Laura Abrardi1 · Laura Rondi1 Received: 2 April 2020 / Revised: 22 April 2020 / Accepted: 5 May 2020 © Associazione Amici di Economia e Politica Industriale 2020
Abstract We present new evidence on the relationship between ownership, control and performance in family firms, by using a sample of Italian publicly listed companies from 2000 to 2017. We account for the potential self-selection bias of family firms with an endogenous treatment selection model. We do not find consistent evidence of a performance premium of Italian family firms or family CEOs as family firms achieve superior profitability, but lower market to book ratios. Interestingly, however, firm value is negatively impacted when the high controlling shares are disjointed from family ownership and when the family CEO is also Chair of the board. We also find that the equity stake is significantly lower when the CEO is a member of the controlling family, suggesting a trade-off between ownership and control within family firms. Keywords Family firms · Corporate governance and control · Firm ownership JEL Classification L20 · G32
1 Introduction This paper presents new evidence on the changes in corporate ownership and governance of Italian publicly listed firms in the XXI century. We focus on “family firms” tracking, from 2000 to 2017, their ownership structure, governance positions, accounting and market performance and CEO parental ties with the controlling shareholder. The main research question of this paper deals with the relationship between family firms’ ownership and performance, which we analyze by estimating first the determinants of family ownership, then the effect of family ownership on * Laura Abrardi [email protected] Laura Rondi [email protected] 1
Department of Management, Politecnico di Torino, DIGEP, Turin, Italy
13
Vol.:(0123456789)
Journal of Industrial and Business Economics
firm performance and, finally, by accounting for the self-selection component of the endogeneity in this relationship. By focusing on the ownership and control structures of a sample of firms within a single country that is subject to a given legal regime (i.e. a French Civil law system), we do not have to control for the potential that country-specific laws, financial institutions and cultures allow to owners for expropriation of non-controlling shareholders. Country specific factors indeed influence to a great extent both the choice of the family to retain the controlling stake, the size of this stake, and the decision to appoint a family CEO as well as the compensation policy (La Porta et al. 1999; Kumar and Zattoni 2013; Elston 2019). All firms in our sample face exactly the same investor protection laws and the same institutional and cultural environment but have nonetheless chosen to adopt very different governance structures and compensation policies. Italian economy is known for being characterized by a very large number of small and medium compa
Data Loading...
