Family Values: Ownership Structure and Performance of Canadian Firms

10 Pages Posted: 6 Mar 2007 Last revised: 18 Jun 2009

See all articles by Michael R. King

Michael R. King

Gustavson School Of Business

Eric B. Santor

Bank of Canada - International Relations Department

Date Written: March 8, 2008

Abstract

This study examines how family ownership affects the performance and capital structure of 613 Canadian firms from 1998 to 2005. In particular, we distinguish the effect of family ownership from the use of control-enhancing mechanisms. We find that freestanding family-owned firms with a single share class have similar market performance than other firms based on Tobin’s q ratios, superior accounting performance based on ROA, and higher financial leverage based on debt-to-total assets. By contrast, family-owned firms that use dual-class shares have valuations that are lower by 17% on average relative to widely-held firms, despite having similar ROA and financial leverage.

Keywords: ownership structure, dual-class shares, pyramids, firm performance, capital structure, Canada

JEL Classification: G12, G15

Suggested Citation

King, Michael Robert and Santor, Eric B., Family Values: Ownership Structure and Performance of Canadian Firms (March 8, 2008). Journal of Banking and Finance, Vol. 32, No. 11, 2008, Available at SSRN: https://ssrn.com/abstract=967812 or http://dx.doi.org/10.2139/ssrn.967812

Michael Robert King (Contact Author)

Gustavson School Of Business ( email )

University of Victoria
Business & Economics Building, Room 246
Victoria, British Columbia V8W 2Y2
Canada
250-721-6425 (Phone)

HOME PAGE: http://https://www.uvic.ca/gustavson/faculty/faculty/faculty/current/kingm.php

Eric B. Santor

Bank of Canada - International Relations Department ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

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