Corporate Governance and Performance in Publicly Listed, Family-Controlled Firms: Evidence from Taiwan

Abstract

Abstract. Using a multi-industry dataset of 228 firms listed on the Taiwan Stock Exchange (TSE) this paper analyses the effects of ownership structure and board characteristics on performance in large, publicly traded firms that are controlled by founding families. After taking account of possible endogeneity problems, we do not find that family control is associated with performance measured in terms of accounting ratios, sales per issued capital, earnings per share and market-to-book value. However, share ownership by institutional investors, and foreign financial institutions in particular, is associated with better performance. Our results indicate that board independence from founding family and board members' financial interests have a positive impact on performance.

Corporate governance and national institutions: A review and emerging research agenda

“…Research from North America (e.g. Morck et al, 1988, Smith & Amoako-Adu, 1999, India (Vissa, Greve & Chen, 2010) and South-East Asia (e.g., Filatotchev et al, 2005; provides evidence of the negative effect of a controlling family on corporate performance. Here family interests may dominate over the interests of non-family shareholders, since the concentration of personal and family wealth in family-controlled firms normally creates a preference for wealth distribution towards dominant owners over other dimensions of firm performance, such as maximization of dividend payments to outside shareholders (Carney & Gedajlovic, 2002).…”

“…Here family interests may dominate over the interests of non-family shareholders, since the concentration of personal and family wealth in family-controlled firms normally creates a preference for wealth distribution towards dominant owners over other dimensions of firm performance, such as maximization of dividend payments to outside shareholders (Carney & Gedajlovic, 2002). Similarly, a high overlap between the controlling family and management in certain settings may also lead to weak monitoring and render the opportunity for shareholder expropriation commonplace (Filatotchev et al, 2005). Finally, family control tends to shield a firm from the disciplinary pressure of the market for corporate control since concentrated share ownership reduces the probability of a hostile take-over (Gomez-Mejia, Larraza- Kintana & Makri, 2003).…”

RELATIONSHIP BETWEEN CORPORATE GOVERNANCE & COMPANY PERFORMANCE OF HONG KONG BASED & CHINA BASED FAMILY-CONTROLLED PROPERTY DEVELOPMENT COMPANIES

“…Nevertheless, the divergence exists in the relationship between CG and performance that some scholars suggest the positive relationship between them but others disagree (Kula and Tatoglu, 2006;Filatotchev et al, 2005).…”

“…From the empirical study in Taiwan, it shows there is no direct relationship between CG and performance in family-controlled companies where the existence of the independence Chairmen does not appear to affect company performance (Filatotchev et al, 2005). Thus, CG has no impact on family-controlled company performance.…”

“…Many Asian companies are controlled by families with concentrated ownership (Ho, 2003;Filatotchev et al 2005;La Porta et al 1999). It is stated that the family-controlled companies expose to the agency problems without separation of ownership and control.…”