2. How Do Family and Control Structures Affect Group Affiliated Firms’
2.5 Conclusion And Implication
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voting rights on firm performance in high-tech industries are similar to all sample results.
In table 2-4, the sighs of the coefficients of excess control rights in Table 2-4 remain negative and this effect is also negative significantly in 2 of 4 models (model 4 and model 8). Furthermore, the effect of excess voting rights is significant negatively in model 4, 5, 7, and 8 in Table 2-4. These results support that the family firms with either excess control rights or excess voting rights perform poorer (Hypothesis 4-1). In contrast, the coefficient of excess control rights in low-tech industries becomes not significant (model 3, 4, 7, and 8 in Table 2-5) and the coefficients of excess voting rights in low-tech industries even turn into significant positive in 3 of 4 models in Table 2-5 (model 4, 7, and 8). These results also support Hypothesis 4-2.
2.5 C
ONCLUSIONA
NDI
MPLICATIONIn the first study, the relationships between control structures, unitary leadership, and group-affiliated firms’ performance are investigates by using longitudinal data of Taiwan business groups (2000-2005).
The results confirm our conjecture that excess control rights and controlling shareholdings are for the ambivalent needs of control and growth and then improve group affiliated firms’ performance. In addition, family firms with such control structures will perform better in non-electronic industry while worse in electronic industry. Lastly, active control, namely family members control management and chairman at the same time, will perform better in electronic industry while worse in non-electronic industry.
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By offering an integrative model of how different types of control structures in business groups influence firm value, our study have implications for research on family control theory, agency theory, and business groups. With respect to family control theory, although there are abundant studies aimed at explaining the effect of family ownership on firm value, research about how does family control influence firm value is still vague or controversial. This study shed light on how and why some group-affiliated firms, even in the same business group with similar ownership structure, perform better than others. In other words, the heterogeneity in group affiliates’ performance can be accounted for not only by varieties of control mechanisms, but also by different environmental conditions.
These findings also contribute to agency theory literature by deepening our understanding of the possible origins of agency problems. Traditional agency theory focuses on the relationships between agent and principal and ignores the agency problems in the relationship between controlling shareholders and outside shareholders. In essence, agency problems are originated mainly from measurement problems and different risk propensity between agents and principals. Thus we eschew the traditional view of control-enhancing mechanisms as generic sources of agency costs, and instead to consider how different control-enhancing mechanisms in different relations (principal-agency relations or principal-principal relations) can arise agency problems in different environmental conditions.
We also seek to contribute to research on business groups by investigating how controlling shareholders exercise different control-enhancing mechanisms to achieve competitiveness. Business groups are considered an efficient response to market
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imperfections. However, business groups are prevalent even in the developed countries like Japan and European countries and there are many group-affiliated firms in Taiwan thrive in the global market (e.g. Giant Bicycles, HTC, TSMC, Acer, etc.). We find that family group-affiliated firms with excess voting rights in low-tech industries and non-family group-affiliated firms with excess voting rights in high-tech industries are advantageous to firm performance. Furthermore, family group-affiliated firms with family members serving as both chairman and CEO in high-tech industries and non-family group-affiliated firms with controlling shareholders serving as both chairman and CEO in low-tech industries are beneficial to firm performance. These results have important implications for the purposes to form a business group.
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T
ABLESTABLE 2-1VARIATIONS IN THREE CONTROL MECHANISMS
Variable Mean Std. Dev. Min Max Observations
excess control overall 0.158608 0.139207 -0.8184 0.7825 N = 3752
between 0.137423 -0.2107 0.7657 n = 902
within 0.053509 -0.45693 0.572248 T-bar = 4.15965 excess vote overall 0.364764 0.273757 -0.5395 0.9967 N = 3752
between 0.264185 -0.5395 0.99355 n = 902
within 0.083355 -0.03652 0.694264 T-bar = 4.15965
active control overall 0.52532 0.499425 0 1 N = 3752
between 0.461965 0 1 n = 902
within 0.198356 -0.30801 1.358653 T-bar = 4.15965
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TABLE 2-2DESCRIPTIVE STATISTICS CORRELATIONS
Variable Mean Std.Dev.
tobin’s q 1.138469 0.805329
industry-adjusted q 0.026153 0.713343
family 0.669046 0.470619
family control 0.476999 0.37598
excess control 0.159238 0.13934
divergence 0.365067 0.272963
active control 0.521015 0.499624 cross holdings 0.285488 0.451706
high tech 0.527888 0.499288
sales 7.920734 1.24418
firm equity 7105.659 22984.35
group equity 27691.5 97226.63
listing 7.035157 8.486782
Sales growth 0.160934 0.422914
market share 0.062647 0.126867
volatility 0.004552 0.011343
firm age 23.01533 11.73386
leverage 0.904373 1.478586
RD intensity 0.027332 0.038922
sales to affiliates 0.161543 0.203139 purchases from affiliates 0.156029 0.2177 loan to affiliates 0.008603 0.046155 debts from affiliates 0.004857 0.043302
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TABLE 2-3 THE EFFECTS OF DIFFERENT CONTROL-ENHANCING MECHANISMS ON FIRM VALUE OF GROUP-AFFILIATED FIRMS (HAUSMAN AND TAYLOR MODEL)
All
(1) (2) (3) (4) (5) (6) (7) (8)
tobinsq tobinsq tobinsq tobinsq adjtobinsq adjtobinsq adjtobinsq adjtobinsq
family -0.071 0.206 -0.023 0.223
(-0.486) (1.222) (-0.168) (1.410)
f_control -0.073 0.186 -0.028 0.266
(-0.549) (0.792) (-0.224) (1.207)
f_excess -0.463 -0.659*
(-1.467) (-2.228)
f_div -0.765*** -0.648**
(-3.625) (-3.278)
f_dual 0.061 0.076
(0.771) (1.033)
fc_excess -0.188 -0.688+
(-0.486) (-1.901)
fc_div -0.467+ -0.352
(-1.861) (-1.499)
fc_dual 0.079 0.085
(0.822) (0.940)
_cons -4.769*** -4.745*** -4.994*** -4.837*** 1.293* 1.277* 1.043* 1.088*
(-3.390) (-3.381) (-3.551) (-3.440) (2.496) (2.565) (1.999) (2.138)
N 3752 3752 3752 3752 3752 3752 3752 3752
t statistics in parentheses
+ p<0.10 * p<0.05 ** p<0.01 *** p<0.001
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TABLE 2-4 THE EFFECTS OF DIFFERENT CONTROL-ENHANCING MECHANISMS ON FIRM VALUE OF GROUP-AFFILIATED FIRMS IN HIGH-TECH INDUSTRIES (HAUSMAN AND
TAYLOR MODEL)
Hi-tech
(1) (2) (3) (4) (5) (6) (7) (8)
tobinsq tobinsq tobinsq tobinsq adjtobinsq adjtobinsq adjtobinsq adjtobinsq
family -0.126 0.360 -0.054 0.326
(-0.660) (1.569) (-0.282) (1.423)
f_control -0.282 0.469 -0.070 0.597
(-1.422) (1.268) (-0.357) (1.621)
f_excess -0.816 -0.858+
(-1.623) (-1.707)
f_div -1.293*** -1.001**
(-4.017) (-3.110)
f_dual 0.193 0.187
(1.533) (1.486)
fc_excess -0.799 -1.127+
(-1.180) (-1.665)
fc_div -1.378** -1.178**
(-3.121) (-2.677)
fc_dual 0.355* 0.402*
(2.004) (2.280)
_cons -2.256*** -2.276*** -2.352*** -2.363*** -0.126 -1.011 -0.050 -0.063 (-3.367) (-3.403) (-3.528) (-3.543) (-0.144) (-1.307) (-0.057) (-0.073)
N 1997 1997 1997 1997 1997 1997 1997 1997
t statistics in parentheses
+ p<0.10 * p<0.05 ** p<0.01 *** p<0.001
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TABLE 2-5 THE EFFECTS OF DIFFERENT CONTROL-ENHANCING MECHANISMS ON FIRM VALUE OF GROUP-AFFILIATED FIRMS IN LOW-TECH INDUSTRIES (HAUSMAN AND
TAYLOR MODEL)
Lo-tech
(1) (2) (3) (4) (5) (6) (7) (8)
tobinsq tobinsq tobinsq tobinsq adjtobinsq adjtobinsq adjtobinsq adjtobinsq
family -0.177 -0.138 -0.058 -0.035
(-0.836) (-0.569) (-0.306) (-0.160)
f_control 0.091 -0.045 0.067 -0.133
(0.732) (-0.212) (0.597) (-0.700)
f_excess 0.006 0.256
(0.020) (0.889)
f_div 0.274 0.324+
(1.292) (1.709)
f_dual -0.095 -0.138*
(-1.234) (-2.003)
fc_excess -0.083 0.065
(-0.243) (0.214)
fc_div 0.477* 0.603**
(2.320) (3.282)
fc_dual -0.136+ -0.189**
(-1.716) (-2.670)
_cons -0.524 -0.685 -0.569 -0.716 0.451 0.371 0.433 0.447
(-0.854) (-1.182) (-0.920) (-1.228) (1.134) (1.070) (1.056) (1.248)
N 1755 1755 1755 1755 1755 1755 1755 1755
t statistics in parentheses
+ p<0.10 * p<0.05 ** p<0.01 *** p<0.001
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TABLE 2-6 THE SUMMARY OF THE EFFECT OF DIFFERENT CONTROL-ENHANCING MECHANISMS ON FIRM PERFORMANCE
全部 高科技 低科技
預期結果 實證結果 預期結果 實證結果 預期結果 實證結果
excess voting rights − − − − (marginal) + not significant
excess control rights − − − − + +
family owner-manager +/− not significant + + − −
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