The Outperformance of Family Firms: The Role of Variance in Earnings Per Share and Analyst Forecast Dispersion on the Swiss Market

Financial Markets and Portfolio Management, Vol. 21, No. 2, pp. 203-220, 2007

Posted: 31 May 2007

See all articles by Thomas Zellweger

Thomas Zellweger

University of St. Gallen - Center for Family Business; Babson College - Arthur M. Blank Center for Entrepreneurship

Roger Meister

University of St. Gallen - Center for Family Business

Urs Fueglistaller

University of St. Gallen - Center for Family Business

Abstract

Recent studies provide empirical evidence that family firms are outperforming their non-family counterparts in terms of stock market performance. For the Swiss stock market we find that family firms indeed outperform their non-family counterparts after controlling for firm size and beta. In addition, our data shows that family firms display more stable earnings per share in contrast to their non-family counterparts. Furthermore we find that the variance of earnings per share positively affects analyst forecast dispersion. According to anomaly literature, lower analyst forecast dispersion has been found to induce higher excess return, which our data supports for the Swiss stock market. By linking variance of earnings per share, analyst forecast dispersion and stock performance we provide an insightful explanation for the excess stock market returns of family firms. In addition, our text extends the theory of dispersion effect with an additional empirical element, the variance of earnings per share.

Keywords: Family firms, Analyst forecast, Dispersion, Earnings per share

JEL Classification: G14, G15, G11

Suggested Citation

Zellweger, Thomas and Meister, Roger and Fueglistaller, Urs, The Outperformance of Family Firms: The Role of Variance in Earnings Per Share and Analyst Forecast Dispersion on the Swiss Market. Financial Markets and Portfolio Management, Vol. 21, No. 2, pp. 203-220, 2007, Available at SSRN: https://ssrn.com/abstract=988676

Thomas Zellweger (Contact Author)

University of St. Gallen - Center for Family Business ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland
+41 71 224 71 42 (Phone)
+41 71 224 71 01 (Fax)

HOME PAGE: http://www.kmu.unisg.ch/org/kmu/web.nsf/wwwPubPersonGer/90349757A26ABCBFC125716B0046D6EE

Babson College - Arthur M. Blank Center for Entrepreneurship

231 Forest Street
Babson Park, MA 02457-0310
United States

Roger Meister

University of St. Gallen - Center for Family Business ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Urs Fueglistaller

University of St. Gallen - Center for Family Business ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

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