Family Business Groups around the World: Financing Advantages, Control Motivations and Organizational Choices

Review of Financial Studies, Forthcoming

ECGI - Finance Working Paper No. 240/2009

66 Pages Posted: 24 Sep 2009 Last revised: 8 May 2011

See all articles by Ronald W. Masulis

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Peter K. Pham

University of Sydney Business School; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Jason Zein

UNSW Business School; Financial Research Network (FIRN)

Date Written: April 21, 2011

Abstract

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.

Keywords: Business Groups, Firm Value, Ownership Structure, Family Firms

JEL Classification: G32, G34, D21, D23

Suggested Citation

Masulis, Ronald W. and Pham, Peter Kien and Zein, Jason, Family Business Groups around the World: Financing Advantages, Control Motivations and Organizational Choices (April 21, 2011). Review of Financial Studies, Forthcoming, ECGI - Finance Working Paper No. 240/2009, Available at SSRN: https://ssrn.com/abstract=1363878 or http://dx.doi.org/10.2139/ssrn.1363878

Ronald W. Masulis

University of New South Wales, Sydney ( email )

UNSW Business School
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Peter Kien Pham (Contact Author)

University of Sydney Business School ( email )

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Institute of Global Finance, UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jason Zein

UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855858 (Phone)
+61 2 93855858 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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