When Family Matters: The Impact of Family Control on Firm Valuation after the Financial Crisis 2007-2009 - An Empirical study on Nordic Publicly Listed Firms

Abstract: For a sample of 412 public companies in the Nordics, we study if and how family control affects stock price performance during the 2007-2009 financial crisis and the 2009-2011 post-crisis period. Overall, family-controlled firms do not perform significantly different from other types of firms. However, family-run firms, primarily driven by founder-run firms, outperform other types of control structures post-crisis. We therefore suggest the founder effect to be the most value-enhancing characteristic of family control. During the crisis, founder-run firms perform worse than other-blockholder-controlled and descendant-run firms. We propose this is due to an overreaction of the market, which misinterprets founders' risk reduction tendencies as signs of financial distress. Risk aversion is not evident in crisis period investment decisions and for family firms, investment changes have no significant correlation with post-crisis stock performance. This implies that for family firms, crisis-period investment cuts are not indicative of financial distress.