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Performance and Valuation of Family Controlled firms in Sweden

By André Holmström and Jonathan Israelsson


This thesis examines the effects of family control on firm performance and valuation. The analysis is based on 1473 observations of firms listed at Nasdaq OMX Stockholm over the years 2001-2009. We find that, although family controlled companies often employ control-enhancing devices, which are associated with lower performance, the operating performance is still better among family-controlled firms given any combination of cash flow rights and voting rights. A family firm with a family member as a CEO has significantly higher performance than those with an external CEO. The reasons behind higher family firm performance compared to non-family firm could be longer investment horizons and lower costs linked to the principal-agent problem for family firms. Higher levels of cash flow ownership held by the largest shareholder also have a positive effect on firm performance. We find no statistically significant effect of family control on firm valuation. However, we find that a higher separation between voting rights and cash flow ownership is associated with lower valuation

Year: 2015
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