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278
Estimating standard errors in finance panel data sets: comparing approaches.
- Review of Financial Studies
, 2009
"... Abstract In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solut ..."
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Cited by 890 (7 self)
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Abstract In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on clustered standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper examines the different methods used in the literature and explains when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.
Inside the family firm: the role of families in succession decisions and performance
, 2005
"... This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making, and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). The paper use ..."
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Cited by 117 (4 self)
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This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making, and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). The paper uses variation in CEO succession decisions that result from the gender of a departing CEO’s first-born child. This is a plausible instrumental variable (IV) as male firstchild firms are more likely to pass on control to a family CEO relative to female first-child firms, but the gender of a first child is unlikely to affect firms ’ outcomes. We find that family successions have a large negative causal impact on firm performance: operating profitability on assets falls by at least four percentage points around CEO transitions. Our IV estimates are significantly larger than those obtained using ordinary least squares. Furthermore, we show that family-CEO underperformance is particularly large for firms in high-growth industries and for relatively large firms. Overall, the empirical results demonstrate that professional non-family CEOs provide extremely valuable services to the organizations they head.
The development of organizational social capital: Attributes of family firms
- Journal of Management Studies
, 2007
"... abstract We develop and extend social capital theory by exploring the creation of organizational social capital within a highly pervasive, yet often overlooked organizational form: family firms. We argue that family firms are unique in that, although they work as a single entity, at least two forms ..."
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Cited by 69 (1 self)
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abstract We develop and extend social capital theory by exploring the creation of organizational social capital within a highly pervasive, yet often overlooked organizational form: family firms. We argue that family firms are unique in that, although they work as a single entity, at least two forms of social capital coexist: the family’s and the firm’s. We investigate mechanisms that link a family’s social capital to the creation of the family firm’s social capital and examine how factors underlying the family’s social capital affect this creation. Moreover, we identify contingency dimensions that affect these relationships and the potential risks associated with family social capital. Finally, we suggest these insights are generalizable to several other types of organizations with similar characteristics.
Corporate disclosures by family firms.
- Journal of Accounting and Economics
, 2007
"... We gratefully acknowledge the support from Standards and Poor's in providing the Transparency and Disclosure (T&D) dataset. We would also like to thank Ian Byrne and Bruce Hamann in S&P for assistance with the T&D survey. ABSTRACT Compared to non-family firms, family firms face les ..."
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Cited by 59 (4 self)
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We gratefully acknowledge the support from Standards and Poor's in providing the Transparency and Disclosure (T&D) dataset. We would also like to thank Ian Byrne and Bruce Hamann in S&P for assistance with the T&D survey. ABSTRACT Compared to non-family firms, family firms face less severe agency problems due to the separation of ownership and management, but more severe agency problems that arise between controlling and non-controlling shareholders. These characteristics of family firms affect their corporate disclosure practices. We show that for U.S. family firms and non-family firms in the S&P 500, reported earnings of family firms are of better quality. Also, the likelihood of family firms issuing management earnings forecasts increases more rapidly with the magnitude of bad news. However, family firms make less voluntary disclosures about their corporate governance practices. Consistent with family firms making better financial disclosure, we find that family firms have larger analyst following, lower dispersion in analysts' earnings forecasts, smaller forecast errors, less volatile forecast revisions, and smaller bid-ask spreads.
Complex Ownership Structures and Corporate Valuations
- MIMEO, OCTOBER MAURY, BENJAMIN AND ANETE PAJUSTE, (2005) “MULTIPLE LARGE SHAREHOLDERS AND FIRM VALUE” JOURNAL OF BANKING AND FINANCE
, 2007
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Bank Liquidity Creation
- Review of Financial Studies
, 2009
"... Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on U.S. banks from 1993-2003. We find that bank liquidity creation incre ..."
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Cited by 44 (6 self)
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Although the modern theory of financial intermediation portrays liquidity creation as an essential role of banks, comprehensive measures of bank liquidity creation do not exist. We construct four measures and apply them to data on U.S. banks from 1993-2003. We find that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003. Large banks, multibank holding company members, retail banks, and recently merged banks create the most liquidity. Bank liquidity creation is positively correlated with bank value. Testing recent theories of the relationship between capital and liquidity creation, we find that the relationship is positive for large banks and negative for small banks.
Mixing family with business: A study of Thai business groups and the families behind them
, 2008
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Understanding the relationship between founder-CEOs and firm performance
- Journal of Empirical Finance
, 2009
"... While previous empirical literature has examined the effect of founder-CEOs on firm per-formance, it has largely ignored the effect of firm performance on founder-CEO status. In this paper, we use instrumental variables methods to better understand the relationship be-tween founder-CEOs and performa ..."
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Cited by 40 (0 self)
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While previous empirical literature has examined the effect of founder-CEOs on firm per-formance, it has largely ignored the effect of firm performance on founder-CEO status. In this paper, we use instrumental variables methods to better understand the relationship be-tween founder-CEOs and performance. Using the proportion of the firm’s founders that are dead and the number of people who founded the company as instruments for founder-CEO status, we find strong evidence that founder-CEO status is endogenous in performance re-gressions. After instrumenting for founder-CEO status, we identify a positive causal effect of founder-CEOs on firm performance which is quantitatively larger than the effect estimated through standard OLS regressions. Contrary to the common perception that founder-CEOs will retain their titles following good performance, we show that performance is negatively related to the likelihood that founders retain the CEO title. This result appears to be driven primarily by founder departures after periods of good performance, rather than by an entrenchment effect that allows founders to remain as CEOs following poor performance. We provide several potential explanations for this new finding. *We wish to thank Yakov Amihud, David Sraer, Daniel Wolfenzon, and seminar participants at the
Are family firms more tax aggressive than non-family firms
- Journal of Financial Economics
, 2010
"... Taxes represent a significant cost to the firm and shareholders, and it is generally expected that shareholders prefer tax aggressiveness. However, this argument ignores potential non-tax costs that can accompany tax aggressiveness, especially those arising from agency problems. Firms owned/run by f ..."
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Cited by 40 (6 self)
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Taxes represent a significant cost to the firm and shareholders, and it is generally expected that shareholders prefer tax aggressiveness. However, this argument ignores potential non-tax costs that can accompany tax aggressiveness, especially those arising from agency problems. Firms owned/run by founding family members are characterized by a unique agency conflict between dominant and small shareholders. Using multiple measures to capture tax aggressiveness and founding family presence, we find that family firms are less tax aggressive than their non-family counterparts, ceteris paribus. This result suggests that family owners are willing to forgo tax benefits in order to avoid the
Examining the “family effect” on firm performance
- Family Business Review
, 2006
"... The purpose of this article is to provide an explanation for the contradictory evidence in the literature regarding the performance of family-owned firms. The article suggests that most of the research fails to clearly describe the “family effect ” on organizational perfor-mance. The “family effect, ..."
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Cited by 39 (1 self)
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The purpose of this article is to provide an explanation for the contradictory evidence in the literature regarding the performance of family-owned firms. The article suggests that most of the research fails to clearly describe the “family effect ” on organizational perfor-mance. The “family effect, ” based on agency theory and the resource-based view of the firm, is described and propositions are generated that examine the relationship between families and organizational performance. Implications for theory and research are also discussed. How might a family that owns and manages an enterprise affect its performance? To answer this question, a number of scholars have attempted to compare the performance of family firms with firms having no family ties, but the results of such studies have led to mixed results and conflicting opinions regarding the impact of family control
