Cofounders and the Value of Family Firms

Prior literature documents the positive effect of the founder's role on family-firm value. In this study, we examine whether the existence of cofounders has any effect on family firm value. We find that the outperformance of founder family firms is concentrated in family firms with cofounders a...

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Bibliographic Details
Published inEmerging markets finance & trade Vol. 51; no. sup3; pp. 20 - 33
Main Authors Baek, Jae-Seung, Kim, Jungmin
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.01.2015
Taylor & Francis, Ltd
Taylor & Francis Ltd
Subjects
Business valuation
family firm
Family owned businesses
firm value
founder
Return on assets
Risk management
Studies
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Summary:Prior literature documents the positive effect of the founder's role on family-firm value. In this study, we examine whether the existence of cofounders has any effect on family firm value. We find that the outperformance of founder family firms is concentrated in family firms with cofounders as measured by Tobin's q. Our results are robust when we use return on assets (ROA) as an alternative measure. These findings suggest that the presence of cofounders would reduce the potential risk arising from the absence of the sole founder and the power concentration in the sole founder and thus lead to higher firm value.
ISSN:1540-496X
1558-0938
DOI:10.1080/1540496X.2015.1039899