Family Business Review

Drawing from agency theory and socioemotional wealth considerations, we evaluate the extent post-IPO investment policy choices and their economic consequences differ for family firms relative to nonfamily firms. Our results suggest that family firms underinvest in post-IPO liquidity, total investment spending, and R&D expenditures, relative to similar non-family firms. On the other hand, family firms overinvest in capital spending and underinvest in acquisition spending relative to nonfamily firms with dispersed but not concentrated ownership structures. Furthermore, while increases in R&D spending decrease shareholder value in family firms, the reverse is the case with acquisition spending.

Adapting the theory of planned behavior to the area of financial choices in family firms, we argue that these choices in family firms are largely affected by family norms, attitude, perceived behavioral control, and behavioral intentions. A time-lagged sample, estimated via structural equation modeling of 118 German family firms, supports a behavioral approach to the study of financing decisions. Specifically, we show that family norms and attitude toward external debt and external equity affect behavioral intention to use the respective financing choices, which in turn affects financing behavior. Perceived behavioral control, however, was shown to negatively affect behavioral intentions to use external equity and was positively related to the use of internal funds. Implications of these capital structure decisions and ideas for future research are discussed.

It is generally assumed that family firms emphasize socioemotional wealth, which exacerbates wealth expropriation from noncontrolling shareholders. We examine this issue in the context of nonfamily shareholders, specifically institutional investors, and find that institutional investors avoid investments in family firms. Furthermore, integrating institutional theory with a socioemotional wealth approach, we find that financial regulation can mitigate external investors’ concerns. These two results are important theoretically because they provide insight into the effect of agency problems specific to family firms and are important for management practice because they can provide guidance for family firms interested in new sources of capital.

This study seeks to understand the governance of post–initial public offering (IPO) family firms and its impact on performance. Using an analysis of a balanced panel data set of 205 publicly listed firms in Taiwan spanning 10 years (2,050 firm-years), we found that extensive family control has a negative impact on the post-IPO performance and that nonfamily block shareholders may divest their stockholdings in these firms to protect their investments. To sustain equity support from their block shareholders, post-IPO family firms should combine the use of family control with professional management in their corporate governance structure.

This article examines the effects of family involvement on dividend policy in closely held firms that face agency problems involving majority–minority shareholders. We argue that minority shareholders press for dividends when they perceive situations fostering wealth expropriation. Looking at 458 Colombian companies, we find that family involvement in management does not affect dividend policy; family involvement in both ownership and control through pyramids affects dividend policy negatively; and family involvement in control through disproportionate board representation affects dividend policy positively. Thus, family influence on agency problems, and hence on dividend policy as a mitigating mechanism, varies depending on family involvement.