School of Economics and Finance Seminar Series

26 Apr 2017 12:30 PM - 1:30 PM
more info
Manawatu campus - Turitea
Sir Geoffrey Peren Building, , Room 3.42

Title: Family Ownership Structures and Corporate Policies: The Case of Family Trusts

Abstract:

Ownership structure plays critical roles in incentives and behaviors within business organizations. The literature has focused on the effects of firm ownership dispersion across managers and investors. We extend the literature by examining the roles of ownership structure within a controlling family. Specifically, we focus on a family trust structure that is a popular vehicle for holding family ownership around the world. The trust structure typically locks controlling ownership within a family for a very long period. Although ensuring family control, the share transfer restriction potentially induces family shirking problems, makes family conflict difficult to resolve, and distorts firm decisions. Based on a sample of publicly traded family firms in Hong Kong, we report that trust controlled firms tend to pay higher dividends, invest less on the long term, and experience worse performance during difficult times, compared with firms owned directly by family members. By contrast, families considering internal conflict potential when choosing their ownership structures do not suffer from such distortions.

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