Family Control, Product Market Competition and Firm Performance

Seoul Journal of Economics 29 (No. 3 2016): 269-303

36 Pages Posted: 30 Aug 2016

Date Written: August 30, 2016

Abstract

In this paper, we try to determine the effect of the presence of family shareholders on company performance in the absence of external corporate governance. Our empirical results using Anderson et al. (2009, 2012)’s family firm data suggests that family firms exhibit superior firm performance relative to non-family firms when the level of product market competition is weak, suggesting that the family control is an effective internal corporate governance mechanism that can compensate for weak external corporate governance. Furthermore, a family firm’s performance results in being superior to non-family firms’ performance in weak competitive markets, regardless of whether the CEO of a family firm is a founder, heir or professional manager. These findings suggest that the family control is an effective organizational structure in mitigating agency problems and enhancing firm performance when external corporate governance is weak.

Keywords: Corporate governance, Family control, Product market competition, Agency problem, Firm performance

JEL Classification: L13, G34, D43

Suggested Citation

Park, Seun-Young and Shin, Hyun-Han, Family Control, Product Market Competition and Firm Performance (August 30, 2016). Seoul Journal of Economics 29 (No. 3 2016): 269-303, Available at SSRN: https://ssrn.com/abstract=2831894

Seun-Young Park

Ewha Womans University ( email )

11-1 Daehyun-dong
Seodaemun-gu
Seoul 120-750, Seoul Seoul 120
Korea, Republic of (South Korea)

Hyun-Han Shin (Contact Author)

Yonsei University ( email )

50 Yonsei Ro
Seodaemoon Gu
Seoul
Korea, Republic of (South Korea)
82-2-21235466 (Phone)

HOME PAGE: http://https://ysb.yonsei.ac.kr/faculty.asp?mid=n02&sOpt=&uid=32

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
75
Abstract Views
590
rank
421,296
PlumX Metrics