41 Pages Posted: 26 Jan 2004
Date Written: January 2004
Family ownership was rapidly diluted in the twentieth century in Britain. Issuance of equity in the process of acquisitions was the main cause. In the first half of the century, it occurred in the absence of minority investor protection and relied on directors of target firms protecting the interests of shareholders. Families were able to retain control by occupying a disproportionate number of seats on the boards of firms. However, in the absence of large stakes, the rise of hostile takeovers and institutional shareholders made it increasingly difficult for families to maintain control without challenge. Potential targets attempted to protect themselves through dual class shares and strategic share blocks but these were dismantled in response to opposition by institutional shareholders and the London Stock Exchange. The result was a regulated market in corporate control and a capital market that looked very different from its European counterparts. Thus, while acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half.
Keywords: Family ownership, control, takeovers
JEL Classification: G32
Suggested Citation: Suggested Citation
Franks, Julian R. and Mayer, Colin and Rossi, Stefano, Spending Less Time with the Family: The Decline of Family Ownership in the UK (January 2004). ECGI - Finance Working Paper No. 35/2004. Available at SSRN: https://ssrn.com/abstract=493504 or http://dx.doi.org/10.2139/ssrn.493504