WWW.THESIS.XLIBX.INFO FREE ELECTRONIC LIBRARY - Thesis, documentation, books

<< HOME
CONTACTS

Pages:     | 1 | 2 ||

# «BI Norwegian School of Management Hand-in date: 01.09.2011 Thesis supervisor: Øyvind Bøhren Program: Master of Science in Business and Economics ...»

-- [ Page 3 ] --

5.2 Endogeniety Obviously, our study might be prone to the criticism that our model has omitted a variable that is correlated with the explanatory variables – and that it actually is one of those which are related to the origin of the the eﬀects which are reported. This problem can be labeled Endogeniety and the implication might be that coeﬃcients obtained from OLS is biased and of little value. Fortunately, panel data is able to exploit both the time dynamics in addition to the cross sectional information to control for non-observable variables. Another form for endogeniety that concerns the literature on family ﬁrms and growth is that it is hard to determine causality. Causality requires direction, sign and magnitude. In our case, we believe it is hard to determine whether growth causes family ownership, or vice versa. Since we are not aware of any speciﬁc exogenous shocks in our family ownership data, we will restrict ourselves from proposing any causality. The endogenity problem is a problem for both the independent and the dependent variable.

5.3 Fixed Eﬀects Model (FEM) When the number of cross sectional units is large and the number of periods is small, FEM and random eﬀects models (REM) can diﬀer signiﬁcantly. In FEM, 5 Methodology 16 the statistical inference is conditioned on the observed cross-sectional units in the sample. This is appropriate if we strongly believe that the individual or cross sectional units in our sample are not random drawings from a larger sample. We believe that this is the case in our sample, and hence we infer that FEM is an appropriate model to take into consideration (Gujarati, 2003, 650).

5.4 Descriptive statistics Descriptive statistics of the most important variables on overall sample is presented in table 2.. The growth variable variation is high even when we have excluded the smallest companies from our sample. The standard deviation is 26% with an average reel growth of 6%. The family ownership concentration is quite high with an average of 81%. This means that most of the companies that are non-listed are controlled by a family. The size of the companies also diﬀer a lot. Where the largest company has an asset side of 61 billion compared to the smallest of 179 thousand. The average company is 15,76 years, but it varies from 0 to 152 years. The non-family ﬁrms is 1,43 years older than the family ﬁrms. The sample consists of many more family ﬁrms than non-family ﬁrms, which is consistent with Berzins, Bohren, and Rydland (2008). Furthermore, family ﬁrms have a higher debt/asset ratio than non-family ﬁrms, which is in-line with our a priori expectation. This might indicate that family ﬁrms increase their debt in order to ﬁnance their projects.

In table 4 and ﬁgure 1, we show that family ﬁrms as a fraction of sample reduces with size. In the lowest quartile the fraction of family ﬁrms is 95%.

Conversely, the highest quartile has a fraction of just 60 %. This could imply that family ﬁrms reduce their risk as they grow.

In line with our hypothesis, we observe that family ﬁrms grow slower than non-family ﬁrms when we look at real growth after inﬂation (2). There is clearly a discrepancy in the growth rates, and it seems to be time-varying at ﬁrst sight.. Furthermore, it is interesting to note that the gap narrows in the business cycle contraction after the IT bubble (2001 to 2003) but it seems to be expanding during the ﬁnancial crisis (2007-2009). Overall, both growth rates are going in the same direction, but the time varying behavior of the gap is strange though it might be consistent with our ﬁnancial constraint argument, because during the ﬁnancial crisis, the credit spread increased to levels much higher than during the IT-bubble. Because family ﬁrms are more indebted, it is reasonable that growth-gap is wider during the ﬁnancial crisis than. t to but the gap might indicate that family ﬁrms growth is more robust during time of recession. We may suspect that the gap also can be caused by the higher degree of diversiﬁcation and the longer time horizon as mentioned in 5 Methodology

–  –  –

Fig. 2: Family ownership without CEO This ﬁgure shows growth year by year. The sample period is 2001 to 2009.

Growth is yearly growth in operating revenue, In the sample the parent ﬁrms, companies less that 15 million in revenue, ﬁrms with no employees and ﬁnancial companies is excluded. Growth is adjusted for inﬂation.

section 2.5.

Multicollinearity is the presence of high degree of correlation among the independent variables (Miller, 2005). Table 7 on page 24 exhibit that the highest correlation is between the industry dummies for manufacturing and trade. and the family dummy and the CEO dummy (with a correlation coeﬃcient of respectively -0.356 and 0.296). It is also not a high correlation between the variable. Based on the correlation matrices. it does not seem that there is an imminent multicollinearity problem.

5.5 Regressions We have intable 5 shown the results from our panel data test. Regression 1 to 4 shows the relationship between family gatherings and growth. In 5 and 6, we introduce ﬁnancial performance. In 7 and 8 we add the variable for the debt ratio. In the last two regressions we include the variable for distinguishing between management and ownership. We have chosen to look at real growth and therefore inﬂation-adjusted growth variable comes into perspective.

Family company variable is negative and signiﬁcant at 1% level in all regression. It varies from -0,0183 to -0,0211.Size and age have a negative coeﬃcient.

Size varies from -0,1232 to -0,1369. Age varies from -0,0003 to -0,0005. Size is signiﬁcant on 1% level in all regressions. Age is not signiﬁcant in any of the regressions. Financial performance is positive and signiﬁcant on 1% level.

The variable ranges from 0.4771 to 0.5341. The leverage ratio is positive and signiﬁcant on 1% level. The variation of the coeﬃcient ranges between 0.1143 and 0.1244. The CEO variable is negative and signiﬁcant on 5% level. The coeﬃcient is -0,0119.

The family dummy variable is negative supporting our hypothesis. Family 5 Methodology 21 companies grow slower than non-family ﬁrms. Size and age have a negative eﬀect on growth. This is consistent with what ﬁrm dynamics studies have shown. The age variable is non signiﬁcant. This is possibly because the size variable absorbs a lot of the same things as the age variable. The ROA is positive showing that higher ﬁnancial performance generate higher growth.

The puzzling ﬁnding is that higher leverage gives higher growth. This is not in line with our thought that ﬁnancial constrained ﬁrms grow slower. Huynh and Petrunia (2010) explains this with fast growing ﬁrms lever up to get most out of their investment opportunities. As we thought, the alignment of management and control create a negative growth.

The regression result indicate that family ﬁrms grow slower than non-family ﬁrms. This is, after adjusting for common ﬁrm dynamic variables. Financial strength is important, but the ﬁrms with high leverage grow faster. Therefore the A3 problem seems to be less important for ﬁrm growth. The A1 problem is an important issue, but the regression shows that it not the sole reason for the lower growth.

5.6 Robustness5.6.1 Alternative methodology

There are several alternatives to the ﬁxed eﬀects model. We have conducted the random eﬀect model on the sample in table 6. We have tested for the appropriateness of FEM using the Hausman Test for Correlated Random Eﬀects.

This test compares a Random eﬀect model with the FEM Random Hausman.

The results are presented in table 6. The Hausman test yields a p-value of 0 which allows us to reject the null hypothesis, i.e. that a random eﬀect model is appropriate, and we prefer using our FEM model.

5.6.2 Alternative model speciﬁcation

–  –  –

Tab. 7: Correlation and multicollinearity This table shows correlation matrix for the dependent variable Growth, the independent variables Debt/asset, ROA, and various control variables for Norwegian limited liability ﬁrms in the period 2000-2008. Growth is yearly growth in operating revenue, Firm age is the number of years from establishment until the observation year, Firm size is total asset Leverage is debt over total assets. In the sample the parent ﬁrms, companies less that 15 million in revenue, ﬁrms with no employees and ﬁnancial companies is excluded. Growth is adjusted for inﬂation.

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) Family 1.000 Age -0.034 1.000 Total asset -0.119 0.039 1.000 Debt/Asset 0.067 -0.127 -0.028 1.000 ROA 0.050 0.005 -0.011 -0.270 1.000 CEO 0.296 -0.009 -0.080 0.035 0.063 1.000 Agriculture -0.028 -0.017 0.027 -0.028 -0.016 -0.007 1.000 Construction 0.069 0.014 -0.022 -0.005 0.052 0.031 -0.062 1.000 Energy -0.129 0.006 0.053 -0.049 -0.008 -0.069 0.130 -0.024 1.000 Manufacturing -0.084 0.078 0.046 -0.098 -0.033 -0.074 -0.089 -0.160 -0.035 1.000 Multi -0.031 0.029 0.053 -0.021 -0.012 -0.006 -0.041 -0.073 -0.016 -0.105 1.000 Service -0.002 -0.050 -0.020 0.069 -0.041 -0.041 -0.103 -0.185 -0.040 -0.266 -0.122 1.000 Trade 0.074 -0.020 -0.043 0.038 0.052 0.097 -0.119 -0.214 -0.046 -0.307 -0.141 -0.356 1.000 Transport -0.066 0.005 0.018 0.046 -0.012 -0.059 -0.031 -0.056 -0.012 -0.080 -0.037 -0.093 -0.108 1.000

## 6 Conclusion 25

5.6.3 Conclusion on robustness

We have tested for an alternative model and proxies in this section. The results from the alternative model is similar to our base case. The FEM seems to be the better model-choice when compared to REM. The alternative proxy ∆asset generates negative growth for family ﬁrm. This is consistent with the result with operating revenue as dependent variable. This section shows that our result is robust and consistent even when we change dependent variable and model.

6 Conclusion

We have found indications that family ﬁrms grow diﬀerently compared to nonfamily ﬁrms. Furthermore, we have also seen that these family ﬁrms vary much more in their growth. The regression shows that a part of the slower growth could be explained by the separation of ownership and control. We ﬁnd no support for our suspicion that ﬁnancial constraints were the determining factor in the diﬀerence between growth of family ﬁrms and non-family ﬁrms.

When we were adjusting for the known controls, such as age, industry and ﬁrm size, there was still some residual eﬀects of family ownership on ﬁrm growth that is unexplained. We found the diﬀerence between non-family ﬁrms and family ﬁrms growth rates to be time-varying and consistently positive.

Our paper shows that exploitation of the minority owners could be an issue in non-listed companies. Family ﬁrm ownership could be beneﬁcial for the family, but not for the society.

## 6 Conclusion 26

References Berzins, J., O. Bohren, and P. Rydland (2008): “Corporate ﬁnance and governance in ﬁrms with limited liability: Basic characteristics,” CCGR Research Report, (01/2008).

Bohren, O. (2011): Eierne, styret og ledelsen. Fagbokforlaget.

Coad, A. (2007): “Firm growth : a survey,” Documents de travail du centre d’economie de la sorbonne, Universite Pantheon-Sorbonne (Paris 1), Centre d’Economie de la Sorbonne.

Coad, A. (2009): The growth of ﬁrms: a survey of theories and empirical evidence, New perspectives on the modern corporation. Edward Elgar.

Coad, A., and W. Holzll (2010): “Firm growth: empirical analysis,” Papers on Economics and Evolution 2010-02, Max Planck Institute of Economics, Evolutionary Economics Group.

Coad, A., and J. P. Tamvada (2008): “The Growth and Decline of Small ﬁrms In Developing Countries,” Papers on Economics and Evolution 2008Max Planck Institute of Economics, Evolutionary Economics Group.

Commission, E. (2003): “COMMISSION RECOMMENDATION of 6 May 2003 concerning the deﬁnition of micro, small and medium-sized enterprises,” Oﬃcial Journal of the European Union.

Evans, D. S. (1987): “Tests of Alternative Theories of Firm Growth,” The Journal of Political Economy, 95(4), pp. 657–674.

Grossman, S. J., and O. D. Hart (1980): “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation,” Bell Journal of Economics, 11(1), 42–64.

Gujarati, D. N. (2003): Basic Econometrics fourth edition.

Hamelin, A. (2009): “Do small family businesses have a peculiar attitude toward growth? Evidence from French SMEs,” Working Papers CEB.

Huynh, K. P., and R. J. Petrunia (2010): “Age eﬀects, leverage and ﬁrm growth,” Journal of Economic Dynamics and Control, 34(5), 1003–1013.

–  –  –

Koller, T., M. Goedhart, D. Wessels, T. Copeland, McKinsey, and Company (2005): Valuation: measuring and managing the value of companies, Wiley ﬁnance series. John Wiley & Sons, Inc.

Meulbroek, L. (2001): “The Eﬃciency of Equity-Linked Compensation: Understanding the Full Cost of Awarding Executive Stock Options,” Financial Management, 30(2).

Miller, J. (2005): The Chicago guide to writing about multivariate analysis, Chicago guides to writing, editing, and publishing. University of Chicago Press.

Morck, R., D. Wolfenzon, and B. Yeung (2005): “Corporate governance, economic entrenchment, and growth.,” Journal of Economic Literature, 43(3), 655–720.

Myers, S. C. (1977): “Determinants of corporate borrowing,” Journal of Financial Economics, 5(2), 147 – 175.

Porta, R. L., F. Lopez-De-Silanes, and A. Shleifer (1999): “Corporate Ownership Around the World,” Journal of Finance, 54(2), 471–517.

Schulze, W. S., M. H. Lubatkin, R. N. Dino, and A. K. Buchholtz (2001): “Agency Relationships in Family Firms: Theory and Evidence,” Organization Science, 12(2), 99–116.

Sraer, D., and D. Thesmar (2007): “Performance and Behavior of Family Firms: Evidence from the French Stock Market,” Journal of the European Economic Association, 5(4), 709–751.

Villalonga, B., and R. Amit (2010): “Family Control of Firms and Industries,” Financial Management, 39(3), 863–904.

Pages:     | 1 | 2 ||

Similar works:

«Inhaltsverzeichnis: 0.Forschungsstand und Aufbau der Arbeit 1.Einleitung 2. Marktanalyse 2.1. Marktabgrenzung 2.1.1. Der Japanische Markt als Wirtschaftsmarkt 2.2. Zielgruppe 2.2.1. Konsumentenverhalten In Japan 2.2.2. Der Japanische Musikfan 3. Beschaffungsanlyse 3.1.Musikverlag 3.2. Plattenfirmen in Japan 3.2.1. Majors 3.2.1.1. Sony Music Entertainment 3.2.1.2.Toshiba EMI 3.2.2. Indies 3.2.2.1.AVEX 3.2.2.2. Victor Entertainment (JVC) 3.2.2.3. Roadrunner Records Japan 3.2.2.4. Imperial Records...»

«Calculating the Unthinkable: Exchange Rate Eﬀects of a Credit Event∗ Arne Breuer and Oliver Sauter† March 2013 1 Introduction Over the last few years, there has been an unusual level of insecurity in capital markets in the wake of a series of interdependent economic and ﬁnancial crises. After the U.S. housing bubble began to collapse in 2007, Lehman Brothers went bankrupt in 2008, which tipped oﬀ a global ﬁnancial crisis. To prevent a collapse of the interbank market and the entire...»

«Running Head: PROLIFIC SOLE AND LEAD AUTHORS IN CCJ 1 THE MOST PROLIFIC SOLE AND LEAD AUTHORS IN ELITE CRIMINOLOGY AND CRIMINAL JUSTICE JOURNALS, 2000-2009 Erin A. Orrick Doctoral Student, Graduate Teaching Assistant The University of Texas at Dallas School of Economic, Political, and Policy Sciences Criminology Program 800 W. Campbell Rd., GR 31 Richardson, TX 75080 eorrick@utdallas.edu Henriikka Weir Doctoral Student, Graduate Teaching Assistant The University of Texas at Dallas School of...»

«The Moral Authority Of Nature Dream them be your highest backbone is two years wide either it need besides the page will get option during percent one there you use to like is to base the mobi as business you may help the change as a online two goals and get an focus lucrative to have the card. The other member offers is shown in purchasing the program and simply providing a store yet of this friend. An birthdays reason is The Moral Authority of Nature put for a package, if goods heading The...»

«‘Double Hegemony’? State and Class in American Foreign Economic Policymaking CHRISTOPH SCHERRER, UNIVERSITY OF KASSEL Published in: Amerikastudien 46 (2001, 4), 573-591.ABSTRACT The paper introduces research on transatlantic relations done by neo-Gramscian authors. This research is distinctive by focusing on class in international relations and by using the concept of hegemony in a relational sense. Hegemony is leadership through the active consent of other classes and groups. A central...»

«Diageo: Your 2015 Employee Benefits | 121 401(k) Plan The Diageo North America, Inc. Savings Plan (401(k) Plan) makes it easy for you to save for your future. Some of your retirement income may come from Social Security, and depending on your length of service, the Company’s Cash Balance Pension Plan. The 401(k) Plan provides a way to save additional money to help maintain your lifestyle when you retire. For information about your legal rights under ERISA and other important administrative...»

«International Journal of Engineering Research and General Science Volume 2, Issue 6, October-November, 2014 ISSN 2091-2730 Review of Literature Survey on Effect of Thermal Coating on Cylinder and Piston Crown Mr.Bhavin D. Patel1, Prof.Ramesh N. Mevada2, Prof. Dhaval P. Patel3 Student, Mechanical Engineering Department, Smt.S.R.Patel Engineering College, Dabhi-Unjha, GTU. Professor, Mechanical Engineering Department, Smt.S.R.Patel Engineering College, Dabhi-Unjha,GTU. Assistant Professor,...»

«The President S Jubilee A desire for the one recipe plan can hide more repayment of 2006 that is altogether. Them is deleted of some job and money sales will understand in some Title of very 10 condition of 80. The time organization industry gets the team of substantially, time, that is a thing within types. All homey speaking which is to put paid in money allows of you'll learn same to make the intrinsic Delegate for your credit. A several employer that's estimated of the competition would say...»

«EHC 2006 SESSION 101: Cold War and Neutrality: East-West Economic Relations in Europe Andrea Komlosy University of Vienna andrea.komlosy@univie.ac.at Austria and the Permeability of the Iron Curtain From Bridge-Building to the Change of System1 Introduction Lying at the junction between East and West, Austria played a special role in establishing contacts and mediating between the two blocs in the years from 1945 to 1989. In this context, the ”Iron Curtain” is seen not only in the narrower...»

«Firms in International Trade1 Andrew B. Bernard Tuck School of Management at Dartmouth & NBER J. Bradford Jensen Peterson Institute for International Economics Stephen J. Redding London School of Economics & CEPR Peter K. Schott Yale School of Management & NBER April 2007 Abstract Despite the fact that importing and exporting are extremely rare firm activities, economists generally devote little attention to the role of firms when discussing international trade. This paper summarizes key...»

«Journal of Finance and Accountancy The price-volume relationship of the Malaysian Stock Index futures market Carl B. McGowan, Jr. Norfolk State University Junaina Muhammad University Putra Malaysia ABSTRACT The objective of this study is to determine the relationship and the causality between the price index and trading volume for both the spot and the next month contracts in the Malaysian stock index futures market and how that relationship changes over time. The daily data of the stock index...»

«Financial market depth: friend or foe when it comes to effective management of monetary policy and capital flows? Sukudhew Singh1 In advice given to emerging market economies (EMEs), it is often emphasised that having developed financial markets would both enable them to manage capital flows more efficiently, thereby reducing the need to intervene in the foreign exchange markets, and allow for more effective monetary policy. But despite their evident benefits, it is also the case that developed...»

<<  HOME   |    CONTACTS
2016 www.thesis.xlibx.info - Thesis, documentation, books

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.