Family Firm Heterogeneity and Corporate Policy: Evidence from Diversification Decisions

18 Pages Posted: 29 Apr 2015

See all articles by Thomas Schmid

Thomas Schmid

The University of Hong Kong - Faculty of Business and Economics

Markus Ampenberger

Technische Universität München - Center for Entrepreneurial and Financial Studies

Christoph Kaserer

Technische Universität München (TUM)

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Date Written: May 2015

Abstract

Manuscript Type. Empirical.

Research Question/Issue. This paper empirically tests how founders and their families affect business segment diversification. We contribute to the literature by studying the distinct effects of family ownership, management, and supervision on diversification strategies.

Research Findings/Insights. We use a large panel dataset of listed German firms. Our results indicate a sharp contrast between firms owned by families and those in which the family holds an active management position. Firms owned by families have higher levels of diversification. However, the opposite is true for firms managed by families. Furthermore, other large shareholders perform a monitoring role and induce family owners to concentrate on their core business.

Theoretical/Academic Implications. This paper clearly confirms that family firms comprise a heterogeneous group of firms. Thus, empirical research in this area should carefully distinguish the impact of different channels (i.e., management vs. ownership) families may use to influence corporate decision making. For diversification decisions, we can even show that family ownership and management have an opposite impact. Founding families have to trade off the desire to preserve financial wealth (via diversification) with the risk of losing control and endangering their socioemotional wealth (SEW).

Practitioner/Policy Implications. For policy makers, our results underline that family firms are not a homogeneous group of firms. Hence, it is important to consider their heterogeneity in the political discussion. For example, needs and preferences of family managed firms may differ substantially from those of family owned firms. Equity investors and debt providers should also be aware of this family firm heterogeneity.

Keywords: Corporate Governance, Family firms, Family ownership, Family management, Diversification

Suggested Citation

Schmid, Thomas and Ampenberger, Markus and Kaserer, Christoph and Achleitner, Ann-Kristin, Family Firm Heterogeneity and Corporate Policy: Evidence from Diversification Decisions (May 2015). Corporate Governance: An International Review, Vol. 23, Issue 3, pp. 285-302, 2015. Available at SSRN: https://ssrn.com/abstract=2600290 or http://dx.doi.org/10.1111/corg.12091

Thomas Schmid (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Markus Ampenberger

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstraße 21
München, 80333
Germany
++49 89 289 25483 (Phone)
++49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

Christoph Kaserer

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

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