Why do family firms congregate in certain industries? En-Te Chen, QUT, Australia John Nowland, CityU, Hong Kong.

Slides:

Advertisements

Similar presentations

THE COST OF CAPITAL FOR FOREIGN INVESTMENTS

Advertisements

Economics Team September 17, US consumers have decreased Debt Consumer Sentiment has increased Initial unemployment has decreased 26,000 There are.

Chapter 4 Return and Risks.

Chapter 4 Return and Risk. Copyright ©2014 Pearson Education, Inc. All rights reserved.4-2 The Concept of Return Return –The level of profit from an investment,

Chapter 4 Return and Risks.

Chapter 12. Determining the Financing Mix n Operating Leverage n Financial Leverage n Capital Structure.

Chapter 12. Determining the Financing Mix n Operating Leverage n Financial Leverage n Capital Structure.

How XBRL Will Enhance the Credibility of Financial Statements Presented by Graham Ward President, IFAC.

Joseph Fan, TJ Wong, and Tianyu Zhang Asset Specificity, Accounting Quality and Family Succession.

29 June 2007The Asian Family Enterprise Forum Family Business in Taiwan: Current and Future Challenges Kuang S. Yeh, Ph.D. Hsi-Mei Chung, Ph.D. Family.

Romano (1993): Public Pension Fund Activism n 1996: Public pension funds own over $300 billion; 30% of corporate equity. n Political pressure on Public.

Chapter 16 Financing. Learning Objectives  Identify the common methods of debt financing for firms.  Identify the common methods of equity financing.

1 - 0 Copyright © 2002 by Harcourt, Inc.All rights reserved. CHAPTER 1 An Overview of Financial Management Role of financial management Career opportunities.

MultiMedia by Stephen M. Peters© 2001 South-Western College Publishing Saturday, November 16th Midterm Topic: Accounting & Finance Quiz #5 Extra Credit.

Introduction to financial management

The Changing Shape of UK Manufacturing Joe Grice, Director and Chief Economist.

Other topics: Adjusted Present Value & Preferred Stock MF 807: Corporate Finance Professor Thomas Chemmanur.

Guaranteed Investment Contracts Chapter 9 Tools & Techniques of Investment Planning Copyright 2007, The National Underwriter Company1 What is it? Traditional.

An Overview of Financial and Multinational Financial Management Corporate Finance Dr. A. DeMaskey.

Risk and Return Intro Returns HPR CAGR YTM, RCYTM APR and APY DY

This module provides a preview to corporate finance by explaining the major role and tasks of the financial executive. The module describes the criteria.

S LIDE 1.1 The Language of Financial Markets Quiz Bowl Game Board Invest in This Potent Investments Index or Exchange Earn It Who am I? Financial Markets.

Financial Management Lecture No. 30 Business Risk faced by FIRM

SOURCES OF FUNDS: 1- retained earnings used from the company to the shareholders as dividends or for reinvestment 2- Borrowing, this tool has tax advantages.

INTRO TO INVESTING Personal Finance.

HFT 2401 Chapter 1 Introduction to Accounting. Accounting A Means to an End  Provides answers to questions  How much cash do we have  What was our.

Fixed cost, Financing and Limited Liability. Financing and Uncertainty The necessity of fixed cost often raises the question of financing. Sometimes financing.

FUNDAMENTALS OF CORPORATE FINANCE MGF301 Fall 1998 Vigdis Boasson SUNY at Buffalo

Ch 1. Introduction to Corporate Finance

Macro Chapter 5 Presentation 1 Trade surplus, trade deficit, GDP, Absolute/Comparative advantage.

1 Are East Asian companies benefiting from Western board practices? John Nowland Discussed by Joseph P.H. Fan Centre of Economics & Finance Chinese University.

FAMILY ECONOMICS & FINANCIAL EDUCATION © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market.

Part I: Organization of a Business Introduction to Business 3e 2 Copyright © 2004 South-Western. All rights reserved. Selecting a Form of Business Ownership.

The Business Of Free Enterprise. Enterprise Vs. Entrepreneur Enterprise Business organization Entrepreneur Introduce new and better goods and services.

Chapter Nine The Capital Markets. Copyright © 2004 Pearson Education Canada Inc. Slide 9–2 Capital Markets Original maturity is greater than one year.

Chapter 11 Financial Markets. Investment Investment is the act of redirecting resources from being consumed today so that they may create benefits in.

Lease Financing.

Microeconomics Business Organizations. Microeconomics: Overview Study of individual businesses and households SMALL scale decisions –A firm’s business.

Family Firms Professor Gilles HILARY NEXIA International Convention.

5.1.1 S ETTING FINANCIAL OBJECTIVES AQA Business 5 D ECISION MAKING TO IMPROVE FINANCIAL PERFORMANCE Recap. Unit 1 What is business? You were introduced.

FUNDAMENTALS OF CORPORATE FINANCE saklviTüal½yCatiRKb;RK g National University of Management mUldæanRKwHén hirBaØvtßúsaCIvk mµ

China’s Competitive Threat A Sector Perspective Presented by Mark Killion, CFA Managing Director Global Insight’s World Industry Services.

C hapter 7 Business Ownership and Organization: Proprietorships, Partnerships, and Corporations © 2002 South-Western.

IGCSE Business Studies

Imen Latrous, Dr. University of Quebec at Chicoutimi LARIGO 1 The MacroJournals Conference on Business and Social Science: New York december 2015.

1 CHAPTER 1 Overview of Financial Management and the Financial Environment.

Private Placements and Venture Capital Chapter 28 Tools & Techniques of Investment Planning Copyright 2007, The National Underwriter Company1 What is it?

When Too Much Monitoring is Costly: Evidence from Asian Family Firms En-Te Chen & John Nowland Queensland University of Technology, Australia Visiting.

1 Risk Changes Following Ex-Dates of Stock Splits Shen-Syan Chen National Taiwan University Robin K. Chou National Central University Wan-Chen Lee Ching.

3.1 SOURCES OF FINANCE Unit 3 – Accounts & Finance.

1 Banco Central do Brasil Foreign Direct Investment in Brazil Banco Central do Brasil Foreign Direct Investment in Brazil October 2001 Armínio Fraga.

EPF-2c Unit 3 (Part One) I can identify the role of entrepreneurs Target B.

INTRODUCTION TO FINANCIAL MANAGEMENT Chapter 1. WHAT IS FINANCE? Finance can be defined as science and art of managing money. KEYWORDS FINANCIAL MANAGEMENT.

EPF – Unit 3 Business Types. EPF-2b Unit 3 (Part One) I can explain how business respond to consumer sovereignty Target A.

Learning Goals Define finance and explain why it is relevant to students. Explain the components of the financial environment. Explain how investors monitor.

Growth through investment. Introduction to Bibby Line Group Started as a family- owned shipping business on 1807 Group now includes logistics, financial.

FORMS OF BUSINESS OWNERSHIP PARTNERSHIPS PARTNERSHIPS –Unlimited Partnership –Limited Partnership CORPORATIONS CORPORATIONS –Private Limited Company –Public.

An Overview of Financial and Multinational Financial Management.

Types of Organizations

Cost of Equity, Control Divergence, and Institutions

Module 22 Financial Sector

International Business

Are East Asian companies benefiting from Western board practices?

Investing: Taking Risks With Your Savings

Investments - Background and Issues

9. Financial Management in the Family Business

Chapter 1 Principles of Finance

The Fundamentals of Investing

12 Multinational Capital Structure & Long Term Financing

9. Financial Management in the Family Business

Presentation transcript:

Why do family firms congregate in certain industries? En-Te Chen, QUT, Australia John Nowland, CityU, Hong Kong

Prior Studies - Family Firms USEuropeAsiaChina Size/Age--+- Performance+-+ Fixed Assets-+- Debt-++ Control Wedge++++ Board Independence-- Risk++- Anderson & Reeb (2003), Villalonga & Amit (2009), Doukas et al. (2009), Maury (2006), Chen & Nowland (2010), Amit et al. (2009)

Research Questions Is family firm participation across industries random? Are family firms better suited to certain industry conditions? Do these conditions provide advantages or disadvantages to shareholders in family firms?

Family Firms - advantages Investment in fixed assets  Family firms better suited to industries with more fixed assets?  Advantage – more willing to undertake long-term investment or overinvestment? Access to debt  Family firms better suited to industries with more debt?  Advantage – can access debt when it is scarce? Tax  Advantage – can make better use of political connections to gain tax concessions?

Family Firms - disadvantage Private benefits of control  If family owners want to consume private benefits then which industry conditions facilitate this? Greater uncertainty Entrenched ownership Less external monitoring  Disadvantage – if consumption has a measurable effect on performance.

Data Taiwan Stock Exchange 1997 – 2007 All firms categorized as family controlled or not by TEJ 27 domestic industry groups Participation = proportion family firms Market Share = proportion family firm sales Relative Performance = TQfamily / TQother

Table 2 – Descriptive Statistics Family Firms (n=3482) Non-Family Firms (n=4179) Means Tests MeanStdevMeanStdev Total Assets (NT$ billions) *** Age (years) *** Fixed Assets *** Debt *** Tax (%) *** Risk *** Ownership Control Wedge *** Board Independence *** Tobin’s Q *** Return on Assets (%) **

Table 3 - Industries IndustryFirm-years Family Firm Participation Family Firm Market Share Relative Performance Paper & Pulp n/a Rubber Glass & Ceramics Automobile Cement Food Financial & Insurance Oil, Gas & Electricity Plastics ……………. Semiconductor Computer & Peripheral Optoelectronic Electronic Products Distribution Communications & Internet Electrical & Cable Other Electronic Information Service

Tables 4 and 5 - extract Family Firm ParticipationFamily Firm Market Share (1)(2)(1)(2) Fixed Assets (4.34)*** (4.26)*** (5.16)*** (4.42)*** Tax (-0.74) (-2.23)** (-1.19) (0.44) Control Wedge (1.45) (1.70)* (0.05) (-0.03) Board Independence (-7.57)*** (-6.00)*** (-2.34)** (-3.29)*** Size (2.93)*** (2.08)** (-0.49) (-1.06) Age (10.04)*** (7.45)*** (7.29)*** (4.01)*** Competition (0.86) (0.34) (-1.85)* (-2.31)** Relative Fixed Assets (4.58)*** (-0.98) Relative Tax (2.08)** (1.84)* Relative Risk (0.54) (1.64)* Relative Control Wedge (-2.14)** (2.01)** Adj-R

Table 6 - extract Relative Performance (1)(2)(3)(4) Family Firm Participation (1.61) Family Firm Market Share (2.65)*** Tax (0.42) (1.85)* Board Independence (-2.07)** (-2.50)** Relative Debt (-2.61)*** Relative Control Wedge (-2.11)** Relative Size (-2.62)*** Relative Age (-3.05)*** Adj-R

Conclusions Family firm participation is not random. Higher in industries with more fixed assets and lower board independence. Family firms performing better than non- family firms in high tax and low board independence industries. Performing worse when have more debt and higher control wedge.