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Redefining family ownership and how it affects firm performance

Fosse, Truls; Dokken, Marina England
Master thesis
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URI
http://hdl.handle.net/11250/2484400
Date
2017
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  • Master of Science [1530]
Abstract
Through this thesis, we want to challenge the established family firm definition of

50% family ownership. We do this by incorporating additional criteria such as

active management from the controlling family and a requirement that the

company has two or more owners from the same family. By implementing these

criteria, we aim to capture more of the features one expect to see when a company

is family owned. We will measure the effects by looking at firm performance and

compare the results from our new definition with the established definition.

This thesis uses panel data of Norwegian public and private companies over the

years 2000-2015 gathered from The Center for Corporate Governance Research.

Our sample consists of approximately 175.000 Norwegian companies.

The models used in this paper will always consist of one base case where family

ownership is measured by the variable “family ultimate ownership”, which

indicates percentage ownership of the controlling family. The base case is

compared against two different models where the first model uses the established

50% definition as a dummy variable and the second model uses our new

definition of family ownership. All these three cases include control variables for

firm age, firm size, leverage and industry risk. The dependent variables are return

on assets (ROA), return on equity (ROE), growth in assets and growth in

revenues.

The results from our analysis indicates that even though we use our new, stricter

definition of family ownership, family firms still outperform non-family firms

with reference to ROA and ROE. However, we see a negative impact on both

growth measures, which could be explained by higher risk aversion and long-term

thinking in family firms. Our findings, regarding the control variables for the new

family definition, also capture the effects and key features one would expect from

a family owned company.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2017
Publisher
BI Norwegian Business School

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