School of Business publications portal
Aaltodoc publication archive
Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Economics | Economics | 2010
Thesis number: 12395
Family firms, share liquidity, and the effect on firm value
Author: Laihomäki, Maija
Title: Family firms, share liquidity, and the effect on firm value
Year: 2010  Language: eng
Department: Department of Economics
Academic subject: Economics
Index terms: kansantaloustiede; economics; perheyhtiöt; family firms; yrittäjyys; entrepreneurship
Pages: 81
Full text:
» hse_ethesis_12395.pdf pdf  size:694 KB (710478)
Key terms: family firm; firm value; Tobin’s q; P/E-ratio; share liquidity; Amihud illiquidity
Abstract:
The main objective of this master’s thesis is to discover how the share liquidity of family firms affects firm value. First I investigate the impact concentrated ownership has on firm performance. After that I heighten my investigation and take share liquidity into account.

The first half of this master’s thesis discusses the comparisons between the performance of family and non-family firms according to existing literature. I present the results of previous studies about family firm’s performance and how active or passive control can affect it. The investigation of stock liquidity is also based on current literature. I discuss liquidity measures and liquidity adjusted capital asset pricing model.

The second half of this master’s thesis consists of the empirical part. I use a regression analysis in which firm value is measured with Tobin’s q or the P/E-ratio. Share liquidity is measured with the Amihud liquidity measure. Finally I investigate a Finnish family firm, Lemminkäinen, and find out how the results that I get in my empirical analysis can be applied to their case.

My dataset is a panel of 108 firms listed on the Helsinki Stock Exchange from 1997 to 2008. I restrict the panel to non-financial firms only. I found that Finnish family firms are worse market performers than non-family firms. The coefficient estimate for family firms is statistically significant at the one-percent level. I also found a strong negative relationship between a family firm’s share illiquidity and firm value. The coefficient estimate for a family firm’s share illiquidity is statistically significant at the one-percent level as well. However, I did not find a statistically significant effect of a non-family firm’s share illiquidity on firm value. As a conclusion, it is evident that family firms suffer the effect of share illiquidity on firm value.
Electronic publications are subject to copyright. The publications can be read freely and printed for personal use. Use for commercial purposes is forbidden.