Does a Family-controlled Firm Perform Better in Corporate Venturing?


National Kaohsiung University of Applied Sciences, Department of Business Administration, 415 Chien- Kung Rd., Kaohsiung, Taiwan. Tel: +886-7-381-4526; Fax: +886-7-396-1245; E-mail:


Manuscript Type: Empirical

Research Question/Issue: Family control involves issues of agency costs and nepotism. This study investigated the impacts of family control on stock market reactions to corporate venturing announcements by public firms. Moreover, in this paper we examined whether the monitoring effect of institutional investors influenced the relationship between family control and stock market reactions.

Research Findings/Insights: In terms of research findings/results, with different measures of family control, the evidence indicated that family control is significantly and negatively associated with the abnormal returns of corporate venturing announcements. Furthermore, we found that the divergence of cash flow and voting rights had a strong negative impact on abnormal returns. Finally, the empirical results suggested that institutional ownership had a significant positive moderating effect on the relationship of family control and stock market reactions.

Theoretical/Academic Implications: Prior research focused on the influence of private family firms on venturing activities. This study contributes to the literature by highlighting the unique characteristics of family control in public firms. This research suggests that nepotism embedded in public family firms is likely to create agency costs resulting from deviations in cash flow and voting rights. This study further shows that institutional ownership plays an important role in reducing agency costs associated with public family firms.

Practitioner/Policy Implications: Our findings suggest that family control is an important consideration for investors in evaluating the wealth impacts of corporate venturing. Therefore, a well-established governance system could be a crucial signal of the quality of corporate venturing for family businesses, particularly the outside governance mechanism.