Journal of International Financial Markets, Institutions and Money, 2022
This study examines whether the heterogeneity of family firms and their legal and institutional c... more This study examines whether the heterogeneity of family firms and their legal and institutional contexts shape their debt maturity. We analyze a dataset of 121,238 listed and private firms worldwide (105 countries) and find significant differences in the determinants of family firms’ debt maturity according to whether they are listed or private SMEs. Our findings show that listed family firms have shorter debt maturities when they have a family CEO, have more concentrated ownership, and are in weak contexts, while these same features facilitate private family SMEs’ access to long-term debt. Generational transition favors longer-term debt in both listed and private family firms.
The aim of this paper is to analyze the influence of the legal and institutional environment on b... more The aim of this paper is to analyze the influence of the legal and institutional environment on bidder firm returns around the announcement date of cross-border Mergers and Acquisitions (M&As). The database includes 469 M&As of European (221 cross-border and 248 domestic) listed firms, with target firms being worldwide public or private firms (40 countries), over the 2002-2006 period. Shareholders of bidder firms place greater value on cross-border M&A announcements than on domestic ones. Cumulative Average Abnormal Return (CAAR), in (-1,+1), is 0.99% for the whole sample, 1.38% for cross-border deals and 0.64% for domestic ones. CAAR of 1 Address: Faculty of Economics. Avda. del Cristo s/n. 33071 Oviedo. Spain. feitoisabel.uo@uniovi.es Phone: +34 985 10 37 94 FAX: +34 985 10 37 08. 2 Address: Faculty of Economics. Avda. del Cristo s/n. 33071 Oviedo. Spain. srequejo@uniovi.es Phone: +34 985 10 39 12 FAX: +34 985 10 37 08 CONTACT INFORMATION: Isabel Feito Ruiz. Faculty of Economics. ...
This research examines the effectiveness of Family Constitution or Family Protocol agreements in ... more This research examines the effectiveness of Family Constitution or Family Protocol agreements in mitigating each type of agency conflict in family firms. We performed a qualitative analysis, through a case study, and found that the succession process is the main driver for implementing this family governance mechanism. Our findings also show that a family constitution is useful in reducing three of the four agency conflicts described in the literature, specifically between family owners and managers, between family shareholders, and with the family at large. Key agreements include training and experience terms for family members to join the firm, transfer clauses of shares inter-vivos and causa mortis, and the development of family governance bodies. However, creditors are generally unaware of the protocol’s existence, hindering its potential positive effects, which has important implications for practitioners. Creditors point out its potential usefulness as a hint of orderly and st...
This study analyzes the relationship between implementing a Family Constitution (Protocol) and fu... more This study analyzes the relationship between implementing a Family Constitution (Protocol) and future family business performance. We analyze a unique sample of 530 Spanish family businesses. Half of these firms received financial aid from the government to implement a Family Protocol during 2003-2013. The analysis reveals that family businesses that implemented a Family Constitution had significantly improved performance within 2 years after the implementation. The positive relationship between the implementation of a Family Constitution and future firm performance is stronger for firms that had a nonfamily CEO, had multiple family owners, or were controlled by later generations.
This article analyses whether the Global Financial Crisis (GFC) has differentially affected the g... more This article analyses whether the Global Financial Crisis (GFC) has differentially affected the growth, risk taking and performance of family businesses depending on the generation in control. Adopting a socioemotional wealth approach, we expect that stronger emotional attachment to the firm in first-generation family businesses leads these businesses to commit more resources and take greater risks than multi-generational family businesses during crisis periods. Nevertheless, their special interest in non-financial goals leads us to predict that first-generation family businesses will perform worse during crises. Evidence from a data sample of private, unlisted and large Spanish firms (6,315) throughout Spain’s particularly deep crisis over the 2006–2011 period shows that first-generation family firms grew more and increased their debt ratios significantly more than multi-generational family firms during the global financial crisis. However, based on return on equity, and consistent with our conjecture, first-generation family businesses performed worse than multi-generational family businesses during this period.
ABSTRACT The aim of this study was to analyse the determinants of reverse takeovers, examining th... more ABSTRACT The aim of this study was to analyse the determinants of reverse takeovers, examining the influence of target firm shareholders’ type in the agreement. We examine reverse takeovers implemented in the Alternative Investment Market between 1999 and 2012, paying special attention to the differences between family and non-family target firms, as well as the impact of the financial crisis. We propose that family firms have a lower probability of accepting a reverse takeover (‘shell’ firm), to avoid both diluting the ownership structure (loss of control) and new shareholders entering their firm. Our main findings show that the higher the percentage of ownership held by family holders, the lower the probability of their being the target firm in a reverse takeover. This effect is maintained during the crisis period, in accordance with the expectation that family firms will have fewer financial constraints.
The aim of this study is to analyze the determinants of delisting decisions on the Alternative In... more The aim of this study is to analyze the determinants of delisting decisions on the Alternative Investment Market (AIM) in London (United Kingdom) for Small Medium Enterprises (SMEs), examining the differences between family and non-family firms in addition to the impact of the financial crisis. We examine the SMEs listed on the AIM during the period 1999-2012. We propose a probit model and a survival analysis (Cox’s proportional hazard model) to estimate the probability that a firm makes a delisting decision. The advantage of the Cox proportional hazard model over other techniques is that it models the expected time to failure. In this study, failure is the delisting decision. Our findings show that the higher the percentage of ownership held by family holders, the lower the probability of delisting on the AIM. The influence of family holders works in accordance with their higher managerial monitoring and long-term aims and is contrary to the hypothesis that they exploit private information in a delisting decision to expropriate minority shareholders. Additionally, larger firms with higher levels of ROA are more likely to delist. The family holders’ influence on the delisting decision is maintained during the crisis period, working in tandem with strong corporate governance in family business and higher financial restrictions (higher cost of equity and debt issues and bank debt).
Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad, 2015
ABSTRACT This paper studies the relevance of the acquiring ownership structure and its legal and ... more ABSTRACT This paper studies the relevance of the acquiring ownership structure and its legal and institutional environment on the decision to pay for a merger and acquisition (M&A) with cash and how this decision influences the acquiring shareholders’ M&A valuation. At the same time, we deal with the potential endogeneity problem. The results show that the acquiring ownership structure and the legal and institutional environment influence both the choice of cash as the payment method and the acquiring shareholders’ valuation, being the payment method an endogenous decision. High levels of ownership concentration in the acquiring firm or in countries with strong legal and institutional environments reduce the probability of cash paid M&As and provoke higher acquiring shareholders valuation around the announcement of an M&A paid in cash.
ABSTRACT The aim of this paper is to study the influence of the Merger and Acquisition (M&amp... more ABSTRACT The aim of this paper is to study the influence of the Merger and Acquisition (M&A) payment method decision on the acquiring shareholders’ M&A valuation, considering the relevance of the acquiring ownership structure and the legal and institutional environment, and the possibility that the payment method decision may be endogenous. The results show that the ownership structure and the legal and institutional environment influence both the choice of payment method and the acquiring shareholders’ valuation. High levels of ownership concentration in the acquiring firm or in countries with strong legal and institutional environments reduce the probability of cash paid M&As. Acquiring shareholders value cash paid M&As more in firms with high levels of ownership concentration because of higher managerial control. Also, it is higher in countries with a strong legal and institutional environment, where lower agency costs are expected, and cash payment is not associated with avoiding ownership dilution.
ABSTRACT We analyze growth in family and non-family Spanish venture capital-backed firms. When th... more ABSTRACT We analyze growth in family and non-family Spanish venture capital-backed firms. When the venture capital firm (VC) does not hold a majority stake, the usual risk aversion attitudes in family firms may lead to conflicts between the management cultures of the existing and new shareholders, which may affect growth. We find lower firm growth after the initial round in family firms only when the investor holds a minority stake. Our results may explain the under-representation of family firms in VC portfolios and highlight the need to align the objectives of family managers and VC investors before the initial VC round.
ABSTRACT The aim of this article is to analyse the determinants of the decision to acquire unlist... more ABSTRACT The aim of this article is to analyse the determinants of the decision to acquire unlisted rather than listed firms in different legal and institutional environments. We estimate a probit model considering the mergers and acquisitions (M&As) announced by European listed firms (19 countries) that acquires worldwide listed or unlisted firms (36 countries) in the period 2002–2007. Our results show that managerial opportunism is a determinant in the acquisition of listed firms, occurring with greater probability in acquiring countries with low shareholder and minority shareholder protection. Information asymmetry is another relevant determinant that promotes the acquisitions of unlisted firms. Furthermore, the less developed the capital market in the country of the acquired firm, the greater the probability of acquisitions of unlisted firms. This article contributes to the M&A literature by showing that in addition to managerial opportunism and information asymmetry, the legal and institutional environments in both the acquiring and the target countries are also relevant aspects explaining the decision of whether to acquire listed or unlisted firms.
Page 1. http://fbr.sagepub.com/ Family Business Review http://fbr.sagepub.com/ content/23/1/60 Th... more Page 1. http://fbr.sagepub.com/ Family Business Review http://fbr.sagepub.com/ content/23/1/60 The online version of this article can be found at: DOI: 10.1177/0894486509353419 2010 23: 60 originally published online 19 ...
International Journal of Globalisation and Small Business, 2005
This study analyses family businesses' growth and internationalisation decisions... more This study analyses family businesses' growth and internationalisation decisions, examining if being a family firm determines differences in these strategies. According to the Resources and Capabilities Theory, family firms can have limitations for internationalisation in their ...
The aim of this paper is the analysis of the return and the trading volume of the analysts’ recom... more The aim of this paper is the analysis of the return and the trading volume of the analysts’ recommendations, taking the column The Indiscrete from Cinco Días, one of the most disseminated Spanish financial newspapers, as the database in the period 1997–1999. The results show that the market reacts before the publication of the recommendations, the cumulative return for the
Journal of International Financial Markets, Institutions and Money, 2022
This study examines whether the heterogeneity of family firms and their legal and institutional c... more This study examines whether the heterogeneity of family firms and their legal and institutional contexts shape their debt maturity. We analyze a dataset of 121,238 listed and private firms worldwide (105 countries) and find significant differences in the determinants of family firms’ debt maturity according to whether they are listed or private SMEs. Our findings show that listed family firms have shorter debt maturities when they have a family CEO, have more concentrated ownership, and are in weak contexts, while these same features facilitate private family SMEs’ access to long-term debt. Generational transition favors longer-term debt in both listed and private family firms.
The aim of this paper is to analyze the influence of the legal and institutional environment on b... more The aim of this paper is to analyze the influence of the legal and institutional environment on bidder firm returns around the announcement date of cross-border Mergers and Acquisitions (M&As). The database includes 469 M&As of European (221 cross-border and 248 domestic) listed firms, with target firms being worldwide public or private firms (40 countries), over the 2002-2006 period. Shareholders of bidder firms place greater value on cross-border M&A announcements than on domestic ones. Cumulative Average Abnormal Return (CAAR), in (-1,+1), is 0.99% for the whole sample, 1.38% for cross-border deals and 0.64% for domestic ones. CAAR of 1 Address: Faculty of Economics. Avda. del Cristo s/n. 33071 Oviedo. Spain. feitoisabel.uo@uniovi.es Phone: +34 985 10 37 94 FAX: +34 985 10 37 08. 2 Address: Faculty of Economics. Avda. del Cristo s/n. 33071 Oviedo. Spain. srequejo@uniovi.es Phone: +34 985 10 39 12 FAX: +34 985 10 37 08 CONTACT INFORMATION: Isabel Feito Ruiz. Faculty of Economics. ...
This research examines the effectiveness of Family Constitution or Family Protocol agreements in ... more This research examines the effectiveness of Family Constitution or Family Protocol agreements in mitigating each type of agency conflict in family firms. We performed a qualitative analysis, through a case study, and found that the succession process is the main driver for implementing this family governance mechanism. Our findings also show that a family constitution is useful in reducing three of the four agency conflicts described in the literature, specifically between family owners and managers, between family shareholders, and with the family at large. Key agreements include training and experience terms for family members to join the firm, transfer clauses of shares inter-vivos and causa mortis, and the development of family governance bodies. However, creditors are generally unaware of the protocol’s existence, hindering its potential positive effects, which has important implications for practitioners. Creditors point out its potential usefulness as a hint of orderly and st...
This study analyzes the relationship between implementing a Family Constitution (Protocol) and fu... more This study analyzes the relationship between implementing a Family Constitution (Protocol) and future family business performance. We analyze a unique sample of 530 Spanish family businesses. Half of these firms received financial aid from the government to implement a Family Protocol during 2003-2013. The analysis reveals that family businesses that implemented a Family Constitution had significantly improved performance within 2 years after the implementation. The positive relationship between the implementation of a Family Constitution and future firm performance is stronger for firms that had a nonfamily CEO, had multiple family owners, or were controlled by later generations.
This article analyses whether the Global Financial Crisis (GFC) has differentially affected the g... more This article analyses whether the Global Financial Crisis (GFC) has differentially affected the growth, risk taking and performance of family businesses depending on the generation in control. Adopting a socioemotional wealth approach, we expect that stronger emotional attachment to the firm in first-generation family businesses leads these businesses to commit more resources and take greater risks than multi-generational family businesses during crisis periods. Nevertheless, their special interest in non-financial goals leads us to predict that first-generation family businesses will perform worse during crises. Evidence from a data sample of private, unlisted and large Spanish firms (6,315) throughout Spain’s particularly deep crisis over the 2006–2011 period shows that first-generation family firms grew more and increased their debt ratios significantly more than multi-generational family firms during the global financial crisis. However, based on return on equity, and consistent with our conjecture, first-generation family businesses performed worse than multi-generational family businesses during this period.
ABSTRACT The aim of this study was to analyse the determinants of reverse takeovers, examining th... more ABSTRACT The aim of this study was to analyse the determinants of reverse takeovers, examining the influence of target firm shareholders’ type in the agreement. We examine reverse takeovers implemented in the Alternative Investment Market between 1999 and 2012, paying special attention to the differences between family and non-family target firms, as well as the impact of the financial crisis. We propose that family firms have a lower probability of accepting a reverse takeover (‘shell’ firm), to avoid both diluting the ownership structure (loss of control) and new shareholders entering their firm. Our main findings show that the higher the percentage of ownership held by family holders, the lower the probability of their being the target firm in a reverse takeover. This effect is maintained during the crisis period, in accordance with the expectation that family firms will have fewer financial constraints.
The aim of this study is to analyze the determinants of delisting decisions on the Alternative In... more The aim of this study is to analyze the determinants of delisting decisions on the Alternative Investment Market (AIM) in London (United Kingdom) for Small Medium Enterprises (SMEs), examining the differences between family and non-family firms in addition to the impact of the financial crisis. We examine the SMEs listed on the AIM during the period 1999-2012. We propose a probit model and a survival analysis (Cox’s proportional hazard model) to estimate the probability that a firm makes a delisting decision. The advantage of the Cox proportional hazard model over other techniques is that it models the expected time to failure. In this study, failure is the delisting decision. Our findings show that the higher the percentage of ownership held by family holders, the lower the probability of delisting on the AIM. The influence of family holders works in accordance with their higher managerial monitoring and long-term aims and is contrary to the hypothesis that they exploit private information in a delisting decision to expropriate minority shareholders. Additionally, larger firms with higher levels of ROA are more likely to delist. The family holders’ influence on the delisting decision is maintained during the crisis period, working in tandem with strong corporate governance in family business and higher financial restrictions (higher cost of equity and debt issues and bank debt).
Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad, 2015
ABSTRACT This paper studies the relevance of the acquiring ownership structure and its legal and ... more ABSTRACT This paper studies the relevance of the acquiring ownership structure and its legal and institutional environment on the decision to pay for a merger and acquisition (M&A) with cash and how this decision influences the acquiring shareholders’ M&A valuation. At the same time, we deal with the potential endogeneity problem. The results show that the acquiring ownership structure and the legal and institutional environment influence both the choice of cash as the payment method and the acquiring shareholders’ valuation, being the payment method an endogenous decision. High levels of ownership concentration in the acquiring firm or in countries with strong legal and institutional environments reduce the probability of cash paid M&As and provoke higher acquiring shareholders valuation around the announcement of an M&A paid in cash.
ABSTRACT The aim of this paper is to study the influence of the Merger and Acquisition (M&amp... more ABSTRACT The aim of this paper is to study the influence of the Merger and Acquisition (M&A) payment method decision on the acquiring shareholders’ M&A valuation, considering the relevance of the acquiring ownership structure and the legal and institutional environment, and the possibility that the payment method decision may be endogenous. The results show that the ownership structure and the legal and institutional environment influence both the choice of payment method and the acquiring shareholders’ valuation. High levels of ownership concentration in the acquiring firm or in countries with strong legal and institutional environments reduce the probability of cash paid M&As. Acquiring shareholders value cash paid M&As more in firms with high levels of ownership concentration because of higher managerial control. Also, it is higher in countries with a strong legal and institutional environment, where lower agency costs are expected, and cash payment is not associated with avoiding ownership dilution.
ABSTRACT We analyze growth in family and non-family Spanish venture capital-backed firms. When th... more ABSTRACT We analyze growth in family and non-family Spanish venture capital-backed firms. When the venture capital firm (VC) does not hold a majority stake, the usual risk aversion attitudes in family firms may lead to conflicts between the management cultures of the existing and new shareholders, which may affect growth. We find lower firm growth after the initial round in family firms only when the investor holds a minority stake. Our results may explain the under-representation of family firms in VC portfolios and highlight the need to align the objectives of family managers and VC investors before the initial VC round.
ABSTRACT The aim of this article is to analyse the determinants of the decision to acquire unlist... more ABSTRACT The aim of this article is to analyse the determinants of the decision to acquire unlisted rather than listed firms in different legal and institutional environments. We estimate a probit model considering the mergers and acquisitions (M&As) announced by European listed firms (19 countries) that acquires worldwide listed or unlisted firms (36 countries) in the period 2002–2007. Our results show that managerial opportunism is a determinant in the acquisition of listed firms, occurring with greater probability in acquiring countries with low shareholder and minority shareholder protection. Information asymmetry is another relevant determinant that promotes the acquisitions of unlisted firms. Furthermore, the less developed the capital market in the country of the acquired firm, the greater the probability of acquisitions of unlisted firms. This article contributes to the M&A literature by showing that in addition to managerial opportunism and information asymmetry, the legal and institutional environments in both the acquiring and the target countries are also relevant aspects explaining the decision of whether to acquire listed or unlisted firms.
Page 1. http://fbr.sagepub.com/ Family Business Review http://fbr.sagepub.com/ content/23/1/60 Th... more Page 1. http://fbr.sagepub.com/ Family Business Review http://fbr.sagepub.com/ content/23/1/60 The online version of this article can be found at: DOI: 10.1177/0894486509353419 2010 23: 60 originally published online 19 ...
International Journal of Globalisation and Small Business, 2005
This study analyses family businesses' growth and internationalisation decisions... more This study analyses family businesses' growth and internationalisation decisions, examining if being a family firm determines differences in these strategies. According to the Resources and Capabilities Theory, family firms can have limitations for internationalisation in their ...
The aim of this paper is the analysis of the return and the trading volume of the analysts’ recom... more The aim of this paper is the analysis of the return and the trading volume of the analysts’ recommendations, taking the column The Indiscrete from Cinco Días, one of the most disseminated Spanish financial newspapers, as the database in the period 1997–1999. The results show that the market reacts before the publication of the recommendations, the cumulative return for the
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