Founding Family Ownership, Stock Market Returns, and Agency Problems

Working Paper SES no 490

57 Pages Posted: 29 Nov 2017 Last revised: 11 Dec 2019

See all articles by Nicolas Eugster

Nicolas Eugster

Catholic University of Lille - IESEG School of Management

Dušan Isakov

University of Fribourg - Faculty of Economics and Social Science

Date Written: July 26, 2019

Abstract

This paper explores the relationship between founding family ownership and stock market returns. Using the entire population of non-financial firms listed on the Swiss stock market for 2003–2013, we find that the stock returns of family firms are significantly higher than those of non-family firms after adjusting the returns for different firm characteristics and risk factors. Family firms generate an annual abnormal return of 2.8% to 7.1%. We also document that family firms potentially having more agency problems earn higher abnormal returns. Our evidence suggests that outside investors receive a premium for holding shares of these firms as they are exposed to the specific agency problems present in family firms.

Keywords: family firm; ownership structure; earnings surprise; market efficiency

JEL Classification: G31, G14

Suggested Citation

Eugster, Nicolas and Isakov, Dušan, Founding Family Ownership, Stock Market Returns, and Agency Problems (July 26, 2019). Working Paper SES no 490. Available at SSRN: https://ssrn.com/abstract=3076950 or http://dx.doi.org/10.2139/ssrn.3076950

Nicolas Eugster

Catholic University of Lille - IESEG School of Management ( email )

3 rue de la Digue
Lille, Lille 59000
France

Dušan Isakov (Contact Author)

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
104
Abstract Views
462
rank
267,699
PlumX Metrics