Spending Less Time with the Family: The Decline of Family Ownership in the UK

39 Pages Posted: 4 Aug 2004 Last revised: 16 Jan 2022

See all articles by Julian R. Franks

Julian R. Franks

London Business School - Institute of Finance and Accounting; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Colin Mayer

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Stefano Rossi

Bocconi University; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2004

Abstract

Family ownership was rapidly diluted in the twentieth century in Britain. The main cause was equity issued in the process of making acquisitions. 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.

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 (July 2004). NBER Working Paper No. w10628, Available at SSRN: https://ssrn.com/abstract=565827

Julian R. Franks (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

Institute of Finance and Accounting
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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI)

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Colin Mayer

University of Oxford - Said Business School ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

Stefano Rossi

Bocconi University ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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