Family Business Groups around the World: Financing Advantages, Control Motivations and Organizational Choices
Ronald W. Masulis
University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)
Peter K. Pham
Australian School of Business - University of New South Wales; Financial Research Network (FIRN)
Australian School of Business; Financial Research Network (FIRN)
April 21, 2011
Review of Financial Studies, Forthcoming
ECGI - Finance Working Paper No. 240/2009
Using a dataset of 28,635 firms in 45 countries, this study investigates the motivations for family-controlled business groups. We provide new evidence consistent with the argument that particular group structures emerge not only to perpetuate control, but also to alleviate financing constraints at the country and firm levels. At the country level, family groups, especially those structured as pyramids, are more prevalent in markets with limited availability of capital. At the firm level, investment intensity is greater for firms held in pyramidal rather than in horizontal structures, reflecting the financing advantages of the former. Within a pyramid, internal equity funding, investment intensity and firm value all increase down the ownership chain. However, group firm performance declines when dual-class shares and cross shareholdings are used as additional control-enhancing mechanisms.
Number of Pages in PDF File: 66
Keywords: Business Groups, Firm Value, Ownership Structure, Family Firms
JEL Classification: G32, G34, D21, D23working papers series
Date posted: September 24, 2009 ; Last revised: May 8, 2011
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