How are U.S. Family Firms Controlled?

Posted: 5 Aug 2009

See all articles by Belen Villalonga

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Raphael ('Raffi") H. Amit

The Wharton School UPENN

Date Written: August 2009

Abstract

In large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash-flow rights. We analyze how they achieve this wedge, and at what cost. Indirect ownership through trusts, foundations, limited partnerships, and other corporations is prevalent but rarely creates a wedge (a pyramid). The primary sources of the wedge are dual-class stock, disproportionate board representation, and voting agreements. Each control-enhancing mechanism has a different impact on value. Our findings suggest that the potential agency conflict between large shareholders and public shareholders in the United States is as relevant as elsewhere in the world.

Keywords: G3, G32

Suggested Citation

Villalonga, Belen and Amit, Raphael H., How are U.S. Family Firms Controlled? (August 2009). The Review of Financial Studies, Vol. 22, Issue 8, pp. 3047-3091, 2009, Available at SSRN: https://ssrn.com/abstract=1443056 or http://dx.doi.org/hhn080

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Raphael H. Amit

The Wharton School UPENN ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6370
United States
215 898 7731 (Phone)

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