Does a Family-controlled Firm Perform Better in Corporate Venturing?

摘要

Research Question/Issue: Family control involves issues of agency costs and nepotism. This study investigated the impactsrnof family control on stock market reactions to corporate venturing announcements by public firms. Moreover, in this paperrnwe examined whether the monitoring effect of institutional investors influenced the relationship between family control andrnstock market reactions.rnResearch Findings/Insights: In terms of research findings/results, with different measures of family control, the evidencernindicated that family control is significantly and negatively associated with the abnormal returns of corporate venturingrnannouncements. Furthermore, we found that the divergence of cash flow and voting rights had a strong negative impact onrnabnormal returns. Finally, the empirical results suggested that institutional ownership had a significant positive moderatingrneffect on the relationship of family control and stock market reactions.rnTheoretical/Academic Implications: Prior research focused on the influence of private family firms on venturing activities.rnThis study contributes to the literature by highlighting the unique characteristics of family control in public firms. Thisrnresearch suggests that nepotism embedded in public family firms is likely to create agency costs resulting from deviationsrnin cash flow and voting rights. This study further shows that institutional ownership plays an important role in reducingrnagency costs associated with public family firms.rnPractitioner/Policy Implications: Our findings suggest that family control is an important consideration for investors inrnevaluating the wealth impacts of corporate venturing. Therefore, a well-established governance system could be a crucialrnsignal of the quality of corporate venturing for family businesses, particularly the outside governance mechanism.