Mini Case Study

1
Mini Case Study

• All in the Family

2
Family Ownership

• Even in U.S., families own control a
  significant number of publicly-traded firms
• Family ownership (founders and descendents) is
  present in 35 of firms in SP 500, where
  families hold 18 of shares
• Outside of U.S., estimated that families control
  over 53 of publicly-traded firms
• Numbers likely higher for privately-held firms

3
Good or Bad?

• Family ownership is good!
• Family members know the firm well, Trust and
  loyalty more easily extended to them, Stronger
  incentives for success (family name at stake)
• Family ownership is bad!
• Cronyism, Likely outsiders with better expertise,
  Reversion to the mean

4
What determines succession?

• NYU professors look at sample of limited
  liability firms in Denmark, have family
  characteristics of CEO!
• Relate family characteristics such as of kids,
  of males, whether male first born, and number
  of spouses to whether a family member succeeds as
  CEO
• What do they find?

5
How about performance?

• How is operating performance of firms affected by
  within-family succession of CEO?
• How would you test for this?
• What do they find?