Idiosyncratic risk, private benefits, and the value of family firms

Patrick Roger and Alain Schatt

Finance Research Letters, 2016, vol. 17, issue C, 235-245

Abstract: Many listed companies around the world are controlled by under-diversified family blockholders, who bear idiosyncratic risk in addition to systematic risk. In this paper, we assume that these shareholders require private benefits to compensate for the additional risk. We propose a simple equilibrium model of private benefits that highlights how the idiosyncratic risk borne by a family blockholder impacts the amount of required private benefits and ultimately, the market value of the family firm.

Keywords: Family firm; Blockholders; Idiosyncratic risk; Private benefits; Market value (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:17:y:2016:i:c:p:235-245

DOI: 10.1016/j.frl.2016.03.015

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