The value of shareholder rights in family firms: Global evidence from a death in the family

Gunsur B. T., Alp E.

CORPORATE GOVERNANCE-AN INTERNATIONAL REVIEW, vol.31, no.4, pp.625-646, 2023 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 31 Issue: 4
  • Publication Date: 2023
  • Doi Number: 10.1111/corg.12484
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EBSCO Legal Source, Index to Legal Periodicals, Index to legal periodicals & books, INSPEC, vLex, DIALNET
  • Page Numbers: pp.625-646
  • Keywords: corporate governance, family firms, internal and external corporate governance, incentive conflicts between the family and outside shareholders, law and finance nexus, RESEARCH-AND-DEVELOPMENT, CORPORATE-CONTROL, AGENCY COSTS, OWNERSHIP CONCENTRATION, MANAGERIAL OWNERSHIP, PERFORMANCE EVIDENCE, VOTING-RIGHTS, GOVERNANCE, STOCK, BUSINESS
  • TED University Affiliated: Yes


Research Question How does the protection of shareholder rights affect the pricing of family firms? Research Findings Investor reaction to a death in the family, measured using abnormal stock returns, averages 0.58% and is significant. Investors perceive the death to be a value enhancing event with the potential to dilute family control. The positive investor reaction is amplified in countries and periods with weaker protection of shareholder rights. Theoretical Implications External and internal corporate governance mechanisms limit the extent to which majority shareholders can take actions that hurt firm value. As such, investor perceptions of how faithfully their interests are protected depend on the extent to which legal rules protect shareholder rights. Policy Implications Investors pay attention to the regulatory environment of the country, as well as corporate governance in the firm when evaluating agency costs. Our research has important policy implications because we show how better protection of shareholder rights affects the pricing and hence the funding costs of family firms.