Governance and long-term operating performance of family and non-family firms in Australia

Enver Halili, Ali Salman Saleh and Rami Zeitun ()

Studies in Economics and Finance, 2015, vol. 32, issue 4, 398-421

Abstract: Purpose - – The purpose of this study is to conduct a comparative analysis of the long-term operating performance of family and non-family firms from the agency theoretic perspective. The analysis is focused on investigating the impact of family ownership on principal–agent conflicts of interest. Design/methodology/approach - – This paper examines the relationship between firm operating performance and family ownership for a large sample of 677 Australian-listed companies. The paper uses the Generalised Method of Moments (GMM) estimator model developed by Arellano and Bond (1991) and used by other studies in finance (Baltagi, 2012; Bond, 2002; Mohamedet al., 2008). Findings - – The empirical results show that firms with ownership concentration has a better operating performance due to the alignment of owner-management interests. This study also finds that family-listed companies have higher survival rates and perform better than non-family companies. Findings support the hypothesis that agency costs arise as a result of privileged access of information and self-interest behaviour of managers (outsiders) in firms with dispersed ownership structures. Originality/value - – Earlier studies have only focused on short-term perspectives, particularly investigating small and medium types of Australian family businesses from narrow aspects, such as productivity, business behaviour, capital structure and leverage. Therefore, this paper has conducted a comparative examination of family and non-family firms listed on the Australian Stock Exchange (ASX) to identify the impact of agency costs on their financial performance.

Keywords: Operating performance; Dynamic regression analysis; Family equity-holding; The principal–agent conflict of interests; B12; C33; G23 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:v:32:y:2015:i:4:p:398-421

DOI: 10.1108/SEF-02-2014-0034

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