Founding Family Ownership, Stock Market Returns, and Agency Problems
Working Paper SES no 490
57 Pages Posted: 29 Nov 2017 Last revised: 17 Jan 2023
Date Written: July 26, 2019
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: Suggested Citation