Problem
Research questions and friction points this paper is trying to address.
family firms
market integrity
founder control
governance entrenchment
trading environment
Not All Family Firms Are Alike: How Founder-Led and Governance-Entrenched Family Control Shape the Trading Environment Around the Firm
🤖 AI Summary
This study clarifies the mechanisms through which family control affects the integrity of firms’ market trading environments, addressing ongoing scholarly debate over whether family firms enhance or undermine market integrity. Drawing on socioemotional wealth and entrenchment theories, it pioneers the linkage between family governance structures and NASDAQ SMARTS abnormal trading surveillance signals, distinguishing among three modes: founder-led leadership, family governance participation, and multi-generational deep control. Using a large sample of 8,634 firm-year observations from U.S. public companies between 2007 and 2018, the empirical analysis reveals that founder CEOs significantly reduce surveillance signals by 9.5%, whereas family governance participation and multi-generational control increase them by 21.3% and 47.1%, respectively, thereby uncovering heterogeneous effects of family firm configurations on market integrity.
📝 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.
Innovation
Methods, ideas, or system contributions that make the work stand out.
family firms
market integrity
founder-CEO
governance entrenchment
socioemotional wealth
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