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Family control and ownership monitoring in Stakeholder-oriented corporate governance

Family control and ownership monitoring in Stakeholder-oriented corporate governance Principal–principal conflicts between family shareholders and other shareholders have been investigated in emerging economies, but fewer studies have examined the effect of concentrated ownership on firm profitability and dividend payout in stakeholder-oriented systems. The purpose of this paper is to examine whether family control leads to principal–principal conflicts resulting in wealth expropriation of minority shareholders by family owners in stakeholder-oriented systems.Design/methodology/approachThis study uses large listed firms of the Tokyo Stock Exchange (TSE) in Japan during 2007–2016. Using 14,991 firm year observations, the authors analyze the effect of family control on dividend payout and firm performance to test the possibility of exploitation by family owners.FindingsThe authors find that family board members do not exploit minority shareholders and rather behave as stewards of the firm. The authors also find that foreign shareholders interact with family control to increase firm profitability, suggesting that foreign shareholders enhance the role of family board members as stewards.Originality/valueExisting research on principal–principal conflicts tends to examine expropriation by family board members in emerging markets. This research reveals that family board members behave like stewards in the presence of stakeholder-oriented corporate governance mechanisms. In addition, foreign shareholders strengthen the stewardship role of family controlled firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Decision Emerald Publishing

Family control and ownership monitoring in Stakeholder-oriented corporate governance

Sakawa, Hideaki; Watanabel, Naoki
Management Decision , Volume 57 (7): 17 – Jul 5, 2019
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References (75)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0025-1747
DOI
10.1108/md-04-2018-0480
Publisher site
See Article on Publisher Site

Abstract

Principal–principal conflicts between family shareholders and other shareholders have been investigated in emerging economies, but fewer studies have examined the effect of concentrated ownership on firm profitability and dividend payout in stakeholder-oriented systems. The purpose of this paper is to examine whether family control leads to principal–principal conflicts resulting in wealth expropriation of minority shareholders by family owners in stakeholder-oriented systems.Design/methodology/approachThis study uses large listed firms of the Tokyo Stock Exchange (TSE) in Japan during 2007–2016. Using 14,991 firm year observations, the authors analyze the effect of family control on dividend payout and firm performance to test the possibility of exploitation by family owners.FindingsThe authors find that family board members do not exploit minority shareholders and rather behave as stewards of the firm. The authors also find that foreign shareholders interact with family control to increase firm profitability, suggesting that foreign shareholders enhance the role of family board members as stewards.Originality/valueExisting research on principal–principal conflicts tends to examine expropriation by family board members in emerging markets. This research reveals that family board members behave like stewards in the presence of stakeholder-oriented corporate governance mechanisms. In addition, foreign shareholders strengthen the stewardship role of family controlled firms.

Journal

Management Decision – Emerald Publishing

Published: Jul 5, 2019

Keywords: Corporate governance; Stakeholders; Family firms

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