Pay-Out Policies in Founding Family Firms

Abstract

This article analyses founding family influence on pay-out policies for Swiss listed firms over the period 2003-2010. We hypothesise that family firms have different incentives and characteristics that affect pay-out decisions and propose three possible explanations: agency theory, reputation building and family income needs. Our results show that founding family firms display significantly higher dividend pay-outs relative to companies with other ownership structures. We also examine specific family characteristics and document that the family stake, the active involvement and generation of the family play an important role for pay-out policies. Our findings appear to be consistent with the family income hypothesis and to some extent with reputational concerns.

Keywords: founding family firms, dual-class shares, payout policy, dividends, share repurchases, minority shareholders, private benefits

JEL Classification: G32, G35