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Cross-disciplinary Seminar Series in
Strategy and Entrepreneurship
Benefits and costs of control-enhancing
mechanisms
in U.S. family firms
(for complete paper, click here)
Belén Villalonga
Harvard Business School
Abstract:
By Belén Villalonga (Harvard Business
School) and Raphael Amit (Wharton)
We analyze how founding families
maintain control of large US
corporations, and at what cost. We find
that indirect ownership through trusts,
foundations, limited partnerships, and
other corporations is prevalent. Yet,
unlike in other countries where
pyramidal control is common, indirect
ownership in the U.S. seldom creates a
wedge between the family’s cash flow and
voting rights. The primary sources of
this wedge in U.S. family firms are
dual-class shares and voting agreements
among shareholders. Additional family
control is frequently obtained through
board representation in excess of voting
control, and through the presence of a
family member as Chairman or CEO. We
also find that the impact of
control-enhancing mechanisms on firm
value depends on the specific mechanism
used.
Belén Villalonga is an
Assistant Professor in the Finance Area
at the Harvard Business School. Her
research interests are in empirical
corporate finance, corporate governance,
and strategy. Her current research
focuses primarily on the effect of
family ownership, control, and
management on firm value, and on the
stock market’s reaction to corporate
restructuring events such as mergers and
acquisitions, alliances, and
divestitures. Her prior research on the
diversification discount, on
privatization, and on ownership
structure and performance, has been
published in leading academic journals.
Professor Villalonga received her Ph.D.
in Management and an M.A. in Economics
from the University of California at Los
Angeles.
For information about the series,
contact Dianne Fox at
dfox@rhsmith.umd.edu.
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