Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 148: Family Ownership and Returns on Investment – Founders, Heirs, and External Managers

Johan E. Eklund (), Johanna Palmberg () and Daniel Wiberg
Additional contact information
Johan E. Eklund: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 3203, SE-103 64 Stockholm, Sweden
Johanna Palmberg: Jönköping International Business School (JIBS), Postal: Department of Economics and CeFEO – Centre for Family Enterprise and Ownership, Jönköping International Business School (JIBS), Department of Economics , P.O. Box 1026, SE-551 11 Jönköping , SWEDEN,
Daniel Wiberg: Jönköping International Business School (JIBS)

Abstract: This paper investigates how family ownership, control, and management affect firms’ investment performance. We use the identity of Chief Executive Officer (CEO) and Chairman of the Board (COB) to establish under what management the firm is: founder, descendant, or external management. The results show that founder management has no effect on investment performance in family firms, whereas descendant management has a negative impact on returns on investment. Having an externally hired manager significantly improves investment performance. The results also indicate that the separation of voting right from cash flow right has a negative impact on investment performance in both family and non-family firms, but the negative effect is larger in family firms.

Keywords: Ownership; Control; Management; Family Firms; Returns on Investments

JEL-codes: C23; G30; K22; L25

26 pages, March 2, 2010

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jee_jp_dw_family_148.pdf PDF-file 

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