Ownership Structure, Analyst Coverage, and Forecast Error: Are family firms different from others?

Abstract

This paper examines the relationship between ownership structure, analyst coverage, and forecast error for a sample of 160 companies listed on the Swiss Exchange for the period 2003-2013. A distinction is made between family firms, widely held firms, and firms owned by another blockholder. I utilize the subsample of family firms to gauge the following characteristics: generation, involvement in management, use of dual class shares, and excess control by the largest shareholder. The results show that family firms are less frequently followed by analysts, but their earnings are better forecasted. Furthermore, by looking only at family firms and their characteristics, I find evidence that the higher the likelihood of expropriation, the higher the number of analysts following them in comparison with other family firms; however, I find little association between the likelihood of expropriation and forecast error.

Keywords: Family Firms, Widely Held Firms, Generation, Active Family, Ownership Structure, Analyst Following, Forecast Error

JEL Classification: G32, G34