We would like to thank an anonymous referee, Josh Coval, Harold Demsetz, Mara Faccio, Ken French, Josh Lerner, André Perold, Enrico Perotti, Daniel Wolfenzon, Josef Zechner, and seminar participants at the University of Amsterdam, Bentley College, University of California Berkeley, Dartmouth College, Georgetown University, Harvard University, Helsinki School of Economics, Insead, Northeastern University, Northwestern University, Real Colegio Complutense in Cambridge, Wirtschaftsuniversität (WU) Wien, the American Finance Association 2009 Meetings, and the Conference on Corporate Governance in Closely Held Firms in Copenhagen for their comments. We thank Mercedes Boland, Sagit Stern, and Xu (“Henry”) Han for their assistance with the data. Belén Villalonga gratefully acknowledges the financial support of the Division of Research at the Harvard Business School. Raphael Amit is grateful for the financial support of the Robert B. Goergen Chair at the Wharton School, the Wharton Global Family Alliance, and the Rodney L. White Center for Financial Research. All errors are our own.
Family Control of Firms and Industries
Article first published online: 16 SEP 2010
© 2010 Financial Management Association International
Volume 39, Issue 3, pages 863–904, Autumn 2010
How to Cite
Villalonga, B. and Amit, R. (2010), Family Control of Firms and Industries. Financial Management, 39: 863–904. doi: 10.1111/j.1755-053X.2010.01098.x
- Issue published online: 16 SEP 2010
- Article first published online: 16 SEP 2010
We test what explains family control of firms and industries and find that the explanation is largely contingent on the identity of families and individual blockholders. Founders and their families are more likely to retain control when doing so gives the firm a competitive advantage, thereby benefiting all shareholders. In contrast, nonfounding families and individual blockholders are more likely to retain control when they can appropriate private benefits of control. Families are more likely to maintain control when the efficient scale is small, the need to monitor employees is high, investment horizons are long, and the firm has dual-class stock.