Not All Family Firms Are Alike: How Founder-Led and Governance-Entrenched Family Control Shape the Trading Environment Around the Firm

Douglas Cumming, Esteban Hernandez and Shan Ji

Papers from arXiv.org

Abstract: Family-firm scholarship offers competing predictions about whether family control protects or threatens market integrity. We argue that the answer depends on how family involvement is exercised. Drawing on socioemotional wealth and agency-entrenchment perspectives, we examine 8,634 U.S. firm-years (2007-2018) and link family-firm constructs to exchange-generated surveillance flags from NASDAQ SMARTS. Founder-CEO control is associated with approximately 9.5% fewer flags, family governance involvement with 21.3% more, and deep multi-generational family control with 47.1% more. The findings reveal heterogeneous identity and entrenchment mechanisms within family firms and connect family-firm governance to a market-integrity outcome previously absent from the literature.

Date: 2026-07
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