Do not wake sleeping dogs: Pay-out policies in founding family firms

Dusan Isakov and Jean-Philippe Weisskopf

No 443, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland

Abstract: This article examines founding family influence on pay-out policies for Swiss listed firms over the period 2003-2010. We find that founding family firms have higher dividends and total pay-outs than non-family firms. There is no significant difference between stock repurchases for the two types of firms. We show that specific firm characteristics such as active involvement of family members, the presence of only one or multiple family members or the existence of a second blockholder play an important role for pay-out policies in family firms. Firms using control enhancing mechanisms do not have significantly lower pay-outs. We propose three possible explanations for the observed pay-out policies: private benefit extraction, reputation building, and family legacy. Our findings appear to be consistent with the reputation building hypothesis.

Keywords: founding family firms; dual-class shares; pay-out policy; dividends; share repurchases; minority shareholders; private benefits (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2013-07-01
New Economics Papers: this item is included in nep-bec and nep-sbm
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