Family ownership is a common phenomenon around the universe. Harmonizing to Burkart, Punanzi, and Shleifer ( 2003 ) , the bulk of houses all over the universe are family-owned and controlled. This is either by one of the laminitiss, or by the laminitiss ‘ descendants and inheritors. This sort of household ownership among in private held houses is about cosmopolitan, but more surprising is the household ownership laterality among publically traded houses.
All over the universe the huge bulk of public houses are household controlled, even in states such as the United States. Wal-Mart Stores is a good illustration of one of the largest public houses that is household owned and controlled ( Burkart et.al, 2003 ) .
Family ownership in the Netherlands is common every bit good. The figure of Dutch household houses about reaches the 200.000 houses and they can be held responsible for over 40 % of employment in the Netherlands, following to about 50 % of the Gross National Product which is produced by these houses ( Floren, Zwartendijk & A ; Geerlings, 2004 ) .
Since household houses in the Netherlands could work as an of import pillar in the fiscal crisis that the state is faced with these yearss, more research into the public presentation of the household houses could be indispensable. Therefore this paper will supply some empirical grounds on the public presentation of Dutch household houses compared to the non-family houses.
1.2 Problem statement and research inquiry
The undermentioned research inquiry will be handled in this paper.
How does the tradeoff between missing in managerial ability and long-run corporate focal point, affect the public presentation of household houses?
The tradeoff that is discussed in the research inquiry describes the fact that having a household house could hold its advantages but disadvantages every bit good.
The disadvantage of missing in managerial ability could be divided into three sections. At first the deficiency of professional direction could be an issue for the household house. These houses could hold high direction maps being handled by household members who might non hold the right managerial accomplishments and/or educational background to map every bit good as a professional ( non-owner ) director. The possible bad managerial decision-making could negatively impact a house ‘s public presentation.
Another deficiency in managerial ability could be direction intrenchment. This is more likely to happen when houses have higher degrees of inside ownership, because the higher grade of inside ownership could protect them from possible coup d’etats. ( Bennett, 2010 )
The 3rd job involves the possible struggle between household proprietors and minority stockholders. It is problematic that, if big sums of the portions are family-owned, the involvements of the minority stockholders will be taken into history. Disagreement between stockholders could hold a negative impact on a house ‘s public presentation.
On the other manus, a household house could bask significant length of service. The proprietor of the household house frequently strives for a house that lasts every bit long as possible, since one of the household descendents and/or inheritors probably will take over the steadfast one twenty-four hours. Consequence is that household ownership is frequently described as being hazard averse, because of their long-run focal point to maximise corporate value. Investings in research & A ; development and capital outgos to increase length of service, frequently show the long-run focal point of these houses.
Another advantage of household owned houses is that it is non likely for a family-owned house to acquire involved in the bureau job. This job arises when the professional director, the agent, takes control and focal points on short-run private benefit maximization as opposed to the long-run focal point of the proprietors of the house, the principals, to increase corporate value. Having laminitiss or descendants run the house could diminish or even extinguish the possibility of struggle of involvement between directors and stockholders, and hence profit the ( long-run ) public presentation of a house.
Following to this, it is really of import for a house that has a long-run scheme focal point to hold a good repute as good. This repute will assist the house to maintain executing good, while endeavoring for a long-run household house.
Most of the research on household houses and their public presentation is based on empirical findings from the United Kingdom and United States investing market. The inquiry arises why the Dutch scene is interesting to look into every bit good. To reply this inquiry the paper written by La Porta, Lopez-de-Silanes, Shleifer and Vishny ( 2002 ) is used as a base. Their research focuses on the legal system of 27 affluent economic systems sing shareholders- and creditor protection. Harmonizing to the informations the Netherlands mark unusually higher in footings of hard currency flow rights ( 0.33 ) and command rights ( 0.70 ) as opposed to the United Kingdom ( 0.14 and 0.25 ) and the United States ( 0.20 and 0.21 ) . Following La Porta et. Al. ( 2002 ) we will happen higher house rating when houses operate in states where minority stockholders are better protected and in houses with higher hard currency flow ownership by the controlling stockholder. Knowing the tonss and the decisions drawn by La Porta et. Al. ( 2002 ) , it is interesting to see if household houses in the Netherlands, where high hard currency flow ownership is present and minority stockholders are good protected, will so surpass non-family houses.
For the Netherlands, I hypothesize, following La Porta et. Al. ( 2002 ) , that the advantages of household ownership and direction should outweigh the disadvantages and hence the household held houses will surpass the non-family held houses.
1.3 Restriction
To specify the country that I will concentrate on, I will curtail my research to household houses and their public presentation within the Netherlands. Following to this, the houses that will be investigated are merely the publically traded houses in the Netherlands, extinguishing all private held houses.
I will utilize old research that has been done sing Western Europe, Asia and the U.S. as a base for this paper to see if the Netherlands differ in any manner from what has been found in old research on household controlled houses and public presentation.
1.4 Structure
This paper proceeds as follows. Chapter 2 will show a literature overview and will clear up what sort of old research has been done, sing the topic of this paper. Following to this, chapter 3 will supply an account of what sort of research method is used and will show some hypothesizes every bit good. The information and empirical findings will be discussed in chapter 4 and the concluding chapter, chapter 5, will reason the paper.
Chapter 2 Literature Overview
2.1 Definition household house
Over the last decennary more and more research has been done sing the subject of household houses, and it is interesting to separate when a house can be qualified as being a household house.
When discoursing household houses, it is frequently difficult to make a good frame that contains all facets of a household house. There is no uncertainty that a house that is household owned by a 100 per centum, can measure up as a household house. These houses are the food market shop in the street for illustration, but besides the huge bulk of the slightly smaller ( private ) houses in the Netherlands. When finding if a publically held house could measure up as a household house, there is no concrete definition to be found.
The typical characteristic of a household house is that the control of the house is ( partly ) owned by the capital owned household, intending that ownership and control are non to the full separated from each other.
Maury ( 2006 ) defines household houses in his research, as houses in which the largest commanding stockholder is either the laminitis or the laminitiss ‘ descendants and inheritors. Following to this, the stockholder needs to keep at least 10 % of the vote rights.
While researching household houses on the Gallic stock market, Sraer and Thesmar ( 2007 ) used a household house definition that was really near to the 1 used by Amit and Villalonga ( 2006 ) . A house could measure up as a household house when the laminitis or a member of the founding household would be a block holder[ 1 ]of the company. They besides stated that this block should stand for at least 20 % of the vote rights.
A different definition was used by Anderson and Reeb ( 2003 ) who defined household houses by utilizing the fractional equity ownership of the establishing household and/or the presence of household members on the board of managers.
In this paper household houses are defined as houses in which the establishing household still owns at least 2.5 % of the hard currency flow rights of the house and/or one of the ( establishing ) household members is present on the board of managers. This definition is moderately close to the definition used by Anderson and Reeb ( 2003 ) , since their research is reasonably near to what is investigated in this paper and some of the same steps to find the variables ownership and public presentation will be used in the 3rd chapter of this paper[ 2 ].
2.2 The possible outperformance of household houses
As stated in the old chapter, most of the houses in the universe are household owned. Faccio and Lang ( 2002 ) found out that in Western Europe, approximately 44 % of the houses is household controlled opposed to the 37 % that is widely held[ 3 ]. Ireland and the UK were two of the states where widely held houses played a more of import function as opposed to continental Europe where household controlled houses were found to be more of import. The inquiry is if these household houses will surpass non-family houses?
Maury ( 2006 ) examined the relationship between household ownership and public presentation. He made a comparing between family-controlled houses and houses with no household commanding stockholders in Western Europe. His consequences, after trying 1672 non-financial houses, suggested that household control lowers the bureau job between proprietors and directors, but gives rise to struggles between household and minority stockholders when stockholder protection is low and control is high.
Following to this, Maury ‘s consequences show that household control can be associated with higher house ratings and higher profitableness, hence surpassing the non-family control houses of the sample.
A whole different result of the ownership and public presentation relation has been found by Anderson and Reeb ( 2003 ) , who used the S & A ; P 500 as a sample for their research. Their empirical grounds suggests that establishing household ownership is associated with superior house public presentation when compared to non-family, or widely held, houses. This grounds was found both in footings of accounting public presentation and market rating. Following to this, the consequences show no consistence with the statement made earlier, that minority stockholders are adversely affected by household ownership. This suggests that the organisational construction of household ownership can be effectual.
Barontini and Caprio ( 2005 ) used 675 publically traded corporations in 11 states in Continental Europe, to look into the relationship between ownership construction and steadfast public presentation. It can be derived from their consequences that the household owned houses have a significantly higher rating and operating public presentation. The findings are besides valid, harmonizing to their research, for future coevalss. These consequences are conflicting with the findings by Villalonga and Amit ( 2006 ) , who found that the outperforming of non-family houses by household houses, was merely relevant for the first coevals.
The job of the deficiency of regulations regulating the minority stockholders can be questioned when saying that the job is a direction job alternatively of a governmental job. A laminitis CEO is frequently questioned in his abilities to pull off the house every bit good as a professional ( non-owner ) director.
On the other manus some early theoreticians believe that it could be the professional director who will non work the most efficient, since they could prefer their ain involvements over that of the stockholders ( Lauterbach and Vaninsky, 1999 ) .
Lauterbach et. Al. ( 1999 ) investigated how the ownership construction can impact a houses ‘ public presentation, by analysing informations of 280 Israeli houses. Their research found that professional managed houses are more efficient in bring forthing net income than household owned houses.
It can be argued that the struggle in these documents on ownership and public presentation of household houses compared to non-family houses can be explained by the precedences and or hazard taking penchants of the direction section, those who control and pull off these houses.
2.3 The possible underperformance of household houses
Achmad, Rusmin, Neilson and Tower ( 2009 ) used Indonesia as a scene to find the relationship between household ownership and corporate public presentation. Indonesia is a state were household ownership is the normal state of affairs for most listed houses. One of the cardinal findings of this research was that household ownership had a direct negative impact on the economic public presentation, since the ROA ( 1,56 % ) was well lower for household owned houses than the ROA ( 7,36 % ) for non-family owned houses.
Their steps for ownership and public presentation were comparable to the 1s that will be used in this survey and therefore it will be interesting to compare the results of Dutch public houses to those of the Indonesian public houses. This is particularly of involvement since Achmad et. Al. ( 2009 ) inquiry the unity of the big stockholders in Indonesia. Their findings are ground to hold concerns about possible net income use and the intrenchment of net incomes due to miss of regulations regulating the minority stockholders.
Achmad et. Al. ‘s findings are consistent with the consequences of Faccio et. Al. ( 2001 ) , who claim that due to low transparence in East Asia, politically powerful households who are in control of the household house, have been able to maltreat and misdirect minority stockholders. Because of the inferior protection of stockholders in Europe, it is non likely that this sort of mistreatment will happen in the Netherlands.
In order to see if the statements that have been made in this chapter will keep for the Dutch public houses as good, chapter 4 will show a arrested development analysis that will prove the hypothesizes based upon the theory of this chapter.
Chapter 3 Data and Methodology
3.1 Conceptual model
Firm Performance
Family Ownership
Management
Investing Behavior
Figure 1 presents the model that will be used in this paper to find the impact of household ownership and direction on investing behaviour and house public presentation. As can be derived from the theoretical account there are two independent x-variables, viz. ‘Family Ownership ‘ and ‘Management ‘ . Following to this, the theoretical account contains a go-between, ‘Investment Behavior ‘ , and a dependent y-variable, ‘Firm Performance ‘ .
Figure 1: Conceptual Model
3.2 Sample and informations beginnings
The dataset has been obtained by uniting several informations watercourses and the one-year studies of the houses. The chief informations watercourse that has been used to find the preferable information is Amadeus. Several informations variables could non be found in the Amadeus informations watercourse and hence the one-year studies of the houses had to be used every bit good. These proxy statements were obtained by sing the web sites of the ( household ) houses.
For the finding whether a house can be qualified as a household house or non, the proxy statements of Amadeus were used. If 2,5 % or more of the hard currency flow rights of a house are held by the laminitiss and/or household members of the laminitiss, the house can be qualified as being a household house.
This paper will curtail itself to the fiscal information of Dutch public houses and in order to be able to do a good comparing between household houses and non-family houses, the sample will be divided in two. The first sample will dwell out of the fiscal information of 30 publically held household houses and the 2nd sample will incorporate the fiscal information of 30 publically held non-family houses.
The fiscal informations semen from the financial year-ends of a ten-year period, viz. 1998 until 2008.
3.3 Methodology
Anderson and Reeb ( 2003 ) utilize a similar method to mensurate the relationship between founding-ownership and public presentation, viz. the standard two-stage least square arrested development. Their first arrested development is done, utilizing the ROA and Tobin ‘s Q as a dependant ( public presentation ) variable on all other explanatory variables. This arrested development is besides used to find if active household engagement in house direction has an impact on public presentation. Anderson and Reeb present a 2nd arrested development to find nonlinearities between house public presentation and founding-family ownership. To find these nonlinearities the first arrested development specifications are modified by including household ownership and the square of household ownership as uninterrupted variables.
Following Wang ( 2005 ) , who used steps harmonizing to Anderson and Reed ( 2003a ) , household ownership can be defined and tested in two ways.
The first variable ( F_FAM ) will be a dummy variable that will find if a house is household owned or non. The variable will be equal to one when establishing household members are still take parting in high managerial maps or on the board of managers, and if otherwise it will be coded zero.
The 2nd variable ( FAM_OWN ) will mensurate the existent initiation household ownership, based on the deliberate per centum of portions that is owned by household members.
For the direction variable the three steps of Wang ( 2005 ) will be followed as good. Wang classifies the household houses into three groups with different CEO attributes.
The first variable ( F_CEO ) will be a dummy variable that will be coded one if a house still has its laminitis as CEO, and coded zero otherwise.
The 2nd variable ( D_CEO ) , a silent person variable every bit good, will be one if the house is headed by a household descendant and zero otherwise.
The 3rd silent person variable ( P_CEO ) will prove if the CEO is a professional director who is hired outside the household. If the CEO is hired outside the household, the variable will be coded one and zero otherwise.
The investing behaviour go-between in this theoretical account will be measured through the undermentioned two variables.
Capital Expenditure ( CAP_INV ) , which is the first variable, will mensurate the outgos of the houses, meant for future benefits.
Research & A ; Development ( RD_INV ) , the 2nd variable, will mensurate the outgo of the house for research and development.
For both variables a 5-point-scale will be used to find their investing behaviour.
Firm public presentation will be the dependent variable in this paper. Following Maury ( 2006 ) , the Tobin ‘s Q and return on assets ( ROA ) will be used.
An estimation of Tobin ‘s Q will be used, viz. that Tobin ‘s Q ( Q_PERFORM ) is equal to: the market value of common equity plus the book value of entire assets minus common equity and deferred revenue enhancements divided by the book value of entire assets. Maury used the same estimation as the one used in La Porta et Al. ( 2002 ) .
The return on assets ( ROA_PERFORM ) will incorporate the followers:
( Net income before preferable dividends + ( involvement disbursal on debt – involvement capitalized ) * ( 1- revenue enhancement rate ) ) all dividend by the last twelvemonth ‘s entire assets times 100.
In order to command for firm-specific and industry features in this survey, the following control variables are used in the arrested development analysis.
Industry ( IND_CONTR ) will be measured, utilizing a silent person variable. The houses of the dataset operate in different industries and hence this variable controls for the industry features of the houses.
Firm size ( SIZE_CONTR ) : for this variable the entire assets given in Amadeus will be used.
Age ( AGE_CONTR ) will be the age harmonizing to the information that is given in the Amadeus information watercourse.
Capital Structure ( CAPSTR_CONTR ) is considered to be determined by spliting the entire debt by the entire equity of the house.
Chapter 4 Data Analysis
4.1 Descriptive statistics
Panel A: Summery for the Full Sample ( n=60 )
Mean
Median
Standard Deviation
Min.
Max.
Tax return on assets ( % )
4.97
6.55
10.97
-34.45
28.94
Tobin ‘s Q
0.75
0.69
0.47
0.16
28.94
Family house ( Dummy )
0.50
0.50
0.50
0.00
1.00
Family ownership ( % )
17.79
1.36
26.25
0.00
89.89
Founder CEO ( Dummy )
0.13
0.00
0.34
0.00
1.00
Descendent CEO ( Dummy )
0.07
0.00
0.25
0.00
1.00
Professional CEO ( Dummy )
0.80
1.00
0.40
0.00
1.00
Family top direction ( Dummy )
0.40
0.00
0.49
0.00
1.00
Capital expenditure/ entire assets ( % )
5.54
5.18
3.65
0.06
18.78
R & A ; D/total assets ( % )
3.91
1.38
5.58
0.00
28.60
Firm size ( Ln ( entire assets ) )
12.52
12.81
1.96
6.78
17.52
Firm age ( old ages )
59.73
36.50
56.05
7.00
245.00
Capital construction ( debt/equity ) ( % )
95.17
61.09
127.00
1.00
882.00
Panel B: Difference of Means Trials ( n=60 )
Family Firms
Nonfamily Firms
t-statistic
1
Number of houses
30
30
2
Family ownership ( % )
35.57
0.00
-7.126
3
Founder CEO ( % )
26,67
0.00
4
Descendent CEO ( % )
13.33
0.00
5
Professional CEO ( % )
60.00
100.00
6
Family top direction ( % )
80.00
0.00
7
Tax return on assets ( % )
6.28
3.66
-0.926
8
Tobin ‘s Q
0.71
0.78
-0.569
9
Capital expenditure/ entire assets ( % )
6.21
4.85
-1.441
10
R & A ; D/total assets ( % )
3.37
4.46
0.747
11
Firm size ( entire assets ) ( a‚¬000,000 )
1,051
2,029
0.702
12
Firm age ( old ages )
53.63
65.83
0.841
13
Capital construction ( debt/equity ) ( % )
84.31
106.03
-0.659
Panel C: Correlation Datas
ROA
James tobins q
Ownership
R & A ; D
Cap. Exp.
Ln ( steadfast age )
Ln ( entire assets )
Cap. Structure
Family CEO
Desc. Chief executive officer
Prof. CEO
ROA
1.000
James tobins q
-0.270*
1.000
Ownership
-0.063
-0.043
1.000
R & A ; D
-0.342**
-0.122
-0.047
1.000
Cap. Exp.
-0.085
-0.199
0.204
0.008
1.000
Ln ( steadfast age )
0.154
-0.189
-0.081
-0.361**
-0.206
1.000
Ln ( entire assets )
0.225
-0.322*
-0.029
-0.324*
-0.033
0.300*
1.000
Cap. Structure
0.157
-0.732**
-0.083
-0.210
-0.168
-0.017
-0.235
1.000
Family CEO
-0.041
-0.013
0.209
0.040
0.000
-0.336**
-0.041
-0.038
1.000
Desc. Chief executive officer
-0.009
-0.052
0.423**
0.077
0.013
0.056
0.005
-0.031
-0.105
1.000
Prof. CEO
0.041
0.044
-0.442**
-0.083
-0.007
0.250
0.031
0.052
-0.784**
-0.535**
1.000
Family Topmgt
0.132
-0.043
0.603**
-0.104
0.113
-0.048
0.091
-0.025
0.480**
0.327*
-0.612**
* . Correlation is important at the 0.05 degree ( 2-tailed )
** . Correlation is important at the 0.01 degree ( 2-tailed )
4.2 Arrested development analysis
Table II: Arrested development Performance and Family Ownership
Tax return on Assetss
Tobin ‘s Q
R & A ; D
Capital Outgo
Intercept
1.200
1.004
19.144
7.705
( 0.100 )
( 48.465 )
( 4.036 )
( 2.301 )
Tax return on assets ( % )
Tobin ‘s Q
Family house
Family ownership
-0.034
-0.000
-0.029
0.035
( -0.524 )
( -0.703 )
( -0.997 )
( 1.686 )
Founder CEO
-0.311
0.001
-0.510
-1.528
( -0.066 )
( 0.146 )
( -0.233 )
( -0.990 )
Descendent CEO
2.152
0.008
3.347
-1.407
( 0.329 )
( 0.671 )
( 1.102 )
( -0.656 )
Professional CEO
Family top direction
Capital expenditure/ entire assets ( % )
-0.205
0.001
( -0.491 )
( 0.992 )
R & A ; D/total assets ( % )
-0.611
0.000
( -2.075 )
( 0.209 )
Firm size ( Ln ( entire assets ) )
0.644
-0.002
-0.547
0.069
( 0.784 )
( -1.310 )
( -1.444 )
( 0.259 )
Firm age ( Ln ( steadfast age ) )
-0.230
0.000
-1.959
-0.934
( -0.123 )
( -0.124 )
( -2.401 )
( -1.621 )
Capital construction ( debt/equity )
0.008
0.000
-0.010
0.001
( 0.385 )
( -0.416 )
( -1.133 )
( 0.152 )
Adjusted R square
0.010
-0.060
0.137
-0.004
t-values in parenthesis
Chapter 5 Conclusion and Discussion
