|
Corporate Opacity and Family Ownership
Ronald Anderson, American University
Augustine Duru, American University
David Reeb, Temple University Philadelphia
ABSTRACT. Recent research indicates that country-level legal protections play a major role in safeguarding the property rights of small investors and thus, the severity of agency conflicts between family owners and minority shareholders. We argue that even in the same legal system, information about firm activities can vary substantially thereby influencing the expropriation risk borne by minority investors. We develop two hypotheses that focus on the family’s role as monitor in-place versus their potential to exploit firm opacity to accrue private benefits of control. We document that family firms are significantly more opaque than non-family firms. We also find a negative relation between family ownership and firm performance in all but the most transparent firms. Surprisingly, additional tests reveal that concerns about divergences in ownership versus control appear to be substantially less important than corporate opacity in explaining the performance impacts of family ownership.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|