Identifying family control is a subjective task. The literature reflects this uncertainty: Yeh (2001) find that families only need 15 percent ownership, on average, to control the firm; et al. Miller and Le Breton-Miller (2006) employ a 20 percent ownership rule; and Colli (2003) et al. use the lowest ownership percentage, 5 percent, but require that the firm have a family member serve in firm management. We identify firms where controlling interest resides in an individual or family (characterized in the paper as “family control”). Whether one should differentiate between control by a family or by an individual is a question that we do not address. Prior academic literature often requires the involvement of at least two family members to qualify as a and some studies impose additional “family firm” requirements. Examples of additional requirements include family member is chief executive, “a there are at least two generations of family control, (and) a minimum of five percent of voting stock is held by the family or trust interest associated with or realization, it”, “(an) expectation, of family 2003, p. 30), family has enough ownership to determine the et al. succession” (Colli “a composition of the board, where the CEO and at least one other executive is a family member, and where the intent is to pass the firm on to the and Le Breton-Miller next generation” (Miller 2003, p. 127). Yeh, (2001) estimate that the level of ownership required to attain control is fifteen et al. percent in Taiwan; they find further that the required control level is inversely related to firm size because ownership by other shareholders is generally more widely dispersed. Morck (1988) et al. find that stock market valuations begin to fall when a controlling ownership level exceeds thirty percent but later find that control can be achieved with much lower ownership percentages through the use of differential voting classes of stock and other techniques (Morck and Yeung 2003). The lack of voting by many shareholders, the use of proxy voting, and dual-class shares
Identifying family control is a subjective task. The literature reflects this uncertainty: Yeh et al. (2001) find that families only need 15 percent ownership, on average, to control the firm; Miller and Le Breton-Miller (2006) employ a 20 percent ownership rule; and Colli et al. (2003) use the lowest ownership percentage, 5 percent, but require that the firm have a family member serve in firm management. We identify firms where controlling interest resides in an individual or family (characterized in the paper as “family control”). Whether one should differentiate between control by a family or by an individual is a question that we do not address. Prior academic literature often requires the involvement of at least two family members to qualify as a “family firm” and some studies impose additional requirements. Examples of additional requirements include “a family member is chief executive, there are at least two generations of family control, (and) a minimum of five percent of voting stock is held by the family or trust interest associated with it”, “(an) expectation, or realization, of family succession” (Colli et al. 2003, p. 30), “a family has enough ownership to determine the composition of the board, where the CEO and at least one other executive is a family member, and where the intent is to pass the firm on to the next generation” (Miller and Le Breton-Miller 2003, p. 127). Yeh, et al. (2001) estimate that the level of ownership required to attain control is fifteen percent in Taiwan; they find further that the required control level is inversely related to firm size because ownership by other shareholders is generally more widely dispersed. Morck et al. (1988) find that stock market valuations begin to fall when a controlling ownership level exceeds thirty percent but later find that control can be achieved with much lower ownership percentages through the use of differential voting classes of stock and other techniques (Morck and Yeung 2003). The lack of voting by many shareholders, the use of proxy voting, and dual-class shares
Governance-Family-Paper-for-IVASS-Rome-Conf.docx