Does Family Ownership Create or Destroy Value: Evidence from Canada
International Journal of Managerial Finance, Vol. 9, No. 1, 2013
42 Pages Posted: 23 Dec 2012 Last revised: 22 Mar 2015
Date Written: December 23, 2012
This study examines whether and how family ownership enhances or damages firm value using a sample of Canadian companies listed on the Toronto Stock Exchange (TSX) between 1999 and 2007. Our results suggest that family companies are generally superior to non-family companies. In addition, we find that control-enhancing mechanisms which are often employed by family companies add value to companies. Furthermore, we find that agency conflicts between ownership and management are less costly than those between majority and minority shareholders, suggesting that family ownership helps resolve the agency conflicts between ownership and management and in turn enhances firm value. Finally, we find that family companies with founders as CEOs outperform those with descendants as CEOs.
Keywords: family ownership, agency conflicts, firm performance
JEL Classification: G32, G34, K22
Suggested Citation: Suggested Citation