The value of shareholder rights in family firms: Global evidence from a death in the family

Date
2022-08-09
Advisor
Instructor
Source Title
Corporate Governance: An International Review
Print ISSN
Electronic ISSN
1467-8683
Publisher
John Wiley & Sons Ltd.
Volume
Issue
Pages
1 - 22
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
Abstract

Research Question: How does the protection of shareholder rights affect the pricing of family firms? Research Findings: Investor reaction to a death in the family, measured using abnor-mal stock returns, averages 0.58% and is significant. Investors perceive the death to be a value enhancing event with the potential to dilute family control. The positive investor reaction is amplified in countries and periods with weaker protection of shareholder rights. Theoretical Implications: External and internal corporate governance mechanisms limit the extent to which majority shareholders can take actions that hurt firm value. As such, investor perceptions of how faithfully their interests are protected depend on the extent to which legal rules protect shareholder rights. Policy Implications: Investors pay attention to the regulatory environment of the country, as well as corporate governance in the firm when evaluating agency costs. Our research has important policy implications because we show how better protec-tion of shareholder rights affects the pricing and hence the funding costs of family firms.

Course
Other identifiers
Book Title
Keywords
Corporate governance, Family firms, Internal and external corporate governance, Incentive conflicts between the family and outside shareholders, Law and finance nexus
Citation
Published Version (Please cite this version)