When Does the Family Govern the Family Firm?

49 Pages Posted: 26 Jul 2018 Last revised: 18 Aug 2018

See all articles by Øyvind Bøhren

Øyvind Bøhren

BI Norwegian Business School

Bogdan Stacescu

BI Norwegian Business School

Line Almli

Deloitte Norway

Kathrine L. Søndergaard

Deloitte Norway

Date Written: July 13, 2018

Abstract

We find that the controlling family holds both the chief executive officer and chair positions in 79% of Norwegian family firms. The family holds more governance positions when it owns large stakes in small, profitable, low-risk firms. This result suggests that the family trades off expected costs and benefits by conditioning participation intensity on observable firm characteristics. We find that the positive effect of performance on participation is twice as strong as the positive effect of participation on performance. The endogeneity of participation should therefore be carefully accounted for when analyzing the effect of family governance on the family firm’s behavior.

Keywords: corporate governance, family firms, private benefits, endogeneity, self-selection

JEL Classification: G34, L21

Suggested Citation

Bøhren, Øyvind and Stacescu, Bogdan and Almli, Line and Søndergaard, Kathrine L., When Does the Family Govern the Family Firm? (July 13, 2018). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 555/2018. Available at SSRN: https://ssrn.com/abstract=3123589 or http://dx.doi.org/10.2139/ssrn.3123589

Øyvind Bøhren (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
46410503 (Phone)

Bogdan Stacescu

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Line Almli

Deloitte Norway ( email )

Dronning Eufemias gate 14
0191 Oslo, 0191
Norway

Kathrine L. Søndergaard

Deloitte Norway ( email )

Dronning Eufemias gate 14
0191 Oslo, 0191
Norway

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