바로가기메뉴

본문 바로가기 주메뉴 바로가기

logo

ISSN : 1738-3110

Article Contents

Next
Early Access e-Submission

Vol.15 No.4

Citation Share

Family Ownership and Firm Value: Perspective to Related-party Transaction and Wealth Transfer

The Journal of Distribution Science / The Journal of Distribution Science, (P)1738-3110; (E)2093-7717
2017, v.15 no.4, pp.5-13
https://doi.org/https://doi.org/10.15722/jds.15.4.201704.5
Kim, Dong-Wook
Kim, Byoung-Gon
Youn, Myoung-Kil
Kim,, D. , Kim,, B. , & Youn,, M. (2017). Family Ownership and Firm Value: Perspective to Related-party Transaction and Wealth Transfer. The Journal of Distribution Science, 15(4), 5-13, https://doi.org/https://doi.org/10.15722/jds.15.4.201704.5

Abstract

Purpose - This research analyzes the effects of Korean family ownership characteristics on firm value. The positive and negative effects of family ownership on Korean firm value were analyzed. If negative effects are evident, this research explores the factors that cause a decrease in firm value. Research design, data, and methodology - The study examined a total of 5,743 companies listed on the Korea Exchange from the period 2002 to 2012 using a panel data regression analysis. Result - An empirical analysis suggests that Korean family ownership diminishes firm value. Korean family firm value has been reduced when controlling shareholders are participated in management and pursue excessive wages, or make the management entrenchment effects associated with ownership-control disparity. When the controlling shareholders of family firms have increasing control rights over the shareholders' general meeting and the directors' board, the agency costs associated with seeking increasing executive wages or private benefits reduce firm value. Conclusions - This study has significance because it reveals the negative effect of family ownership in Korea on firm value. These negative effects can be the result of agency problems from controlling family shareholders seeking excessive wages or ownership-control disparity.

keywords
Family Ownership, Related-party Transaction, Wealth Transfer, Ownership-Control Disparity, Agency Problem

Reference

1.

Anderson, R. C., & Reeb, D. M. (2003). Founding Family Ownership and Firm Performance: Evidence from the S & P 500. Journal of Finance, 58(3), 1301-1328. doi:10.1111/1540-6261.00567

2.

Ayranci, E. A. (2014). A Study on the Influence of Family on Family Businesses and its Relationship to Satisfaction with Financial Performance. E+M Ekonomie a Management, 17(2), 87-105. doi:10.15240/tul/001/2014-2-007

3.

Barontini, R., & Caprio, L. (2006). The Effect of Family Control on Firm Value and Performance:Evidence from Continental Europe. European Financial Management, 12(5), 689-723. doi:10.1111/j.1468-036x.2006.00273.x

4.

Burkart, M., Gromb, D., & Panunzi, F. (1997). Large Shareholders, Monitoring, and the Value of the Firm. Quarterly Journal of Economics, 112, 693-728. doi:10.1162/003355397555325

5.

Chang, J. J., & Shin, H. (2007). Family Ownership and Performance in Korean Conglomerates. Pacific-Basin Finance Journal, 15, 329-352. doi:10.1016/j.pacfin.2006.07.004

6.

Choi, W. S., & Lee, W. B. (2005). Is Family Ownership a Determinant of Firm Performance. Asian Review of Financial Research, 18(1), 121-155.

7.

Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the Family Business by Behavior. Entrepreneurship Theory and Practice, 23(4). 19-39.

8.

Chung, K. H., & Pruitt, S. W. (1994). A Simple Approximation of Tobin’s q. Financial Management, 23, 70-74. doi:10.2307/3665623

9.

Claessens, S., Djankov, S., & Lang, L. H. P. (2000). Separation of Ownership from Control of East Asian Firms. Journal of Financial Economics, 58, 81-112. doi:10.1016/s0304-405x(00)00067-2

10.

Core, J. E., Guay, W. R., & Larcker, D. F. (2003). Executive Equity Compensation and Incentives: A Survey, Federal Reserve Bank of New York. Economic Policy Review, 9(1), 27-50. doi:10.2139/ssrn.276425

11.

Deangelo, H., & Deangelo, L. (2000). Controlling Stockholders and the Disciplinary Role of Corporate Payout Policy: A Study of the Times Mirror Company. Journal of Financial Economics, 56, 153-207. doi:10.1016/s0304-405x(00)00039-8

12.

Demsetz, H., & Lehn, K. (1985). The Structure of Corporate Ownership: Causes and Consequences. Journal of Political Economy, 93, 1155-1177. doi:1086/261354

13.

Douma, S., George, R., & Kabir, R. (2006). Foreign and Domestic Ownership, Business Groups, and Firm Performance: Evidence from a Large Emerging Market. Strategic Management Journal, 27(7), 637-657. doi:10.1002/smj.535

14.

Fama, E. (1980). Agency Problem and the Theory of the Firm. Journal of Political Economy, 88, 288-307.

15.

Gomez-Mejia, L., Larraza-Kintana, M., & Makri, M. (2003). The Determinants of Executive Compensation in Family-controlled Public Corporations. Academy of Management Journal, 46(2), 226-241.

16.

Hoopes, D. G., & Miller, D. (2006). Ownership Preferences, Competitive Heterogeneity, and Family- controlled Businesses. Family Business Review, 19(2), 89-101. doi:10.1111/j.1741-6248.2006.00064.x

17.

Joh, S. W. (2003). Corporate Governance and Firm Profitability: Evidence from Korea Before the Economic Crisis. Journal of Financial Economics, 68, 287-322. doi:10.1016/s0304-405x(03)00068-0

18.

Kim, E. (2006). The Impact of Family Ownership and Capital Structures on Productivity Performance of Korean Manufacturing Firms: Corporate Governance and the ‘Chaebol’ Problem. Journal of Japanese International Economies, 20, 209-233. doi:10.2139/ssrn.799664

19.

Kim K. P., Kim, Y. O., Lee, M. K., & Youn, M. K. (2014). The Effects of Co-Brand Marketing Mix Strategies on Customer Satisfaction, Trust, and Loyalty for Medium and Small Traders and Manufacturers. E & M Economics and Management, 17(1), 140-151. doi:10.15240/tul/001/2014-1-011

20.

Lang, L., & Stulz, R. (1994). Tobin’s Q, Corporate Diversification, and Firm Performance. Journal of Political Economy, 102, 1248-1280. doi:10.1086/261970

21.

Lemmon, M. L., & Lins, K. (2003). Ownership Structure, Corporate Governance and Firm Value: Evidence from the East Asian Financial Crisis. Journal of Finance, 58, 1445-1468. doi:10.2139/ssrn.265108

22.

Lindenberg, E. B., & Ross, S. A. (1981). Tobin’s q Ratio and Industrial Organization. Journal of Business, 1, 1-32. doi:10.1086/296120

23.

Lins, K., & Lins, V. (2003). Equity Ownership and Firm Value in Emerging Markets. Journal of Financial and Quantitative Analysis, 38, 159-184. doi:10.2139/ssrn.214909

24.

Litz, R. A. (1997). The Family Firm’s Exclusion from Business School Research: Explaining the Void;Addressing the Opportunity. Entrepreneurship Theory and Practice, 21(3), 55-71.

25.

McConnaughy, D., Walker, M., Henderson, G., & Chandra, M. (1998). Founding Family Controlled Firms:Efficiency and Value. Review of Financial Economics, 7, 1-19. doi:10.1016/s1058-3300(99)80142-6

26.

Min, B., & Verhoeven, P. (2013). Outsider Board Activity, Ownership Structure and Firm Value: Evidence from Korea. International Review of Finance, 13(2), 187-214. doi:10.1111/irfi.12004

27.

Morck, R., Shleifer, A., & Vishny, R. (1988). Management Ownership and Market Valuation: An Empirical Analysis. Journal of Financial Economics, 20, 293-316. doi:10.1016/0304-405x(88)90048-7

28.

Odehnalová, P., & Olśevićová, K. (2009). Agent-based Simulation of Development Stages of Family Businesses. E+M Ekonomie a Management, 12(4), 77-83.

29.

Perez-Gonzalez, F. (2006). Inherited Control and Firm Performance. American Economic Review, 96(5), 1559-1588. doi:10.1257/aer.96.5.1559

30.

Schulze, W. S., Lubatkin, M. H., Dino, R. N., & Buchholtz, A. K. (2001). Agency Relationship in Family Firms: Theory and Evidence. Organization Science, 12(9), 99-116. doi:10.1287/orsc.12.2.99.10114

31.

Servaes, H. (1996). The Value of Diversification During the Conglomerate Merger Wave. Journal of Finance, 51, 1201-1225. doi:10.2307/2329392

32.

Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. Journal of Finance, 52, 737-783.

33.

Smith, B. F., & Amoako-Adu, B. (1999). Management Succession and Financial Performance of Family Controlled Firms. Journal of Corporate Finance, 5(4), 341-368. doi:10.1016/s0929-1199(99)00010-3

34.

Stulz, R. M. (1988). Managerial Control of Voting Rights:Financing Policies and the Market for Corporate Control. Journal of Financial Economics, 20, 25–54. doi:10.1016/0304-405x(88)90039-6

35.

Westhead, P., & Howorth, C. (2006). Ownership and Management Issues Associated with Family Firm Performance and Company Objectives. Family Business Review, 19(4), 301-316. doi:10.1111/j.1741-6248.2006.00077.x

36.

Westhead, P., & Cowling, M. (1998). Family Firm Research:The Need for a Methodological Rethink. Entrepreneurship Theory and Practice, 23(1), 31-56.

The Journal of Distribution Science

Early Access e-Submission OA Policy