Date of Award

8-2-2014

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Finance

First Advisor

Harley E. Ryan, Jr.

Second Advisor

Jayant R. Kale

Third Advisor

Omesh Kini

Fourth Advisor

Conrad S. Ciccotello

Abstract

To study the evolution of family-controlled firms, I follow a sample of firms from the IPO to the end of 2011 or until the firm is delisted from the stock exchange. I use the longitudinal data to examine the influence of family characteristics on family control horizons, family firm evolution outcomes, and family firm performance. I find that greater founder involvement and extended family involvement at the IPO predict a longer family control horizon. Greater founder involvement and extended family involvement in year t predict a lower probability of family exit in year t+1 and year t+2. I find that family’s excess voting rights and family descendant CEOs decrease firm value. In addition, family ownership decreases firm value but increases accounting performance. Further, I find that family firms with higher family ownership and multiple family members have less R&D expenditures but more capital expenditures. My findings suggest that families with greater involvement in the firm seek to maintain a longer control horizon. However, these families do not maintain an investment perspective that can increase long-term firm value. Instead, they seem to prefer safer investments and focus on accounting performance. The evolution of my sample firms suggests survivorship and selection issues in cross-sectional samples and demonstrates the importance of considering cohort effects and firms’ evolution stages when we examine the influence of founders and families.

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