How are U.S. Family Firms Controlled?

73 Pages Posted: 11 Jun 2006 Last revised: 9 Nov 2018

See all articles by Belen Villalonga

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Raphael ('Raffi") H. Amit

The Wharton School UPENN

Date Written: July 1, 2007


In large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash flow rights. We analyze how families achieve this separation between cash-flow and control rights, and at what cost. We find that indirect ownership through trusts, foundations, limited partnerships, and other corporations is prevalent but rarely creates a wedge between cash-flow and control rights. The primary sources of the wedge are dual-class stock and voting agreements. Additional control is frequently obtained through board representation in excess of voting control, and through the presence of a family member as CEO or Chairman of the Board. We also find that the impact of control-enhancing mechanisms on firm value depends on the specific mechanism used: the effect is negative for dual-class stock and disproportional board representation, but positive for pyramids and voting agreements.

Keywords: Family firms, ownership, control, dual-class stock, corporate governance

JEL Classification: G32, G3

Suggested Citation

Villalonga, Belen and Amit, Raphael H., How are U.S. Family Firms Controlled? (July 1, 2007). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 131/2006, Available at SSRN: or

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Raphael H. Amit

The Wharton School UPENN ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6370
United States
215 898 7731 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics