The influence of national culture and institutional voids on family owership of large firms: A country level empirical study

a r t i c l e i n f o a b s t r a c t There is considerable variation across countries in both the extent to which large publicly listed firms are family-owned and the dominance of such family-owned firms in stock markets. The literature presents competing theoretical viewpoints on what influences such country-level variation. On one hand, institutional economists suggest that institutional voids can have a strong influence. On the other hand, cultural sociologists suggest that a country's culture can have a strong influence. One type of institutional void is a lack of institutional norms and regulations needed for monitoring contracts (which can discourage owners from hiring professional agents for top management positions in their firms) and another type of institutional void is a lack of financial credit availability in the country. Cultural dimensions include collectivism (i.e. cohesion within in-groups/families) and power distance (i.e. inequalities in society). This country-level empirical study suggests that both national culture and institutional voids influence family ownership patterns around the world, and that institutional voids moderate the influence of national culture. National culture has a stronger influence when a country has institutional voids; however, the influence of national culture weakens when institutional voids are overcome. 1. Introduction In some countries, many of the largest publicly listed firms are family-owned. A firm is said to be family-owned if a person is the controlling shareholder; that is, a person (rather than a state, corporation, management trust, or mutual fund) can garner enough shares to assure at least 20% of the voting rights and the highest percentage of voting rights in comparison to other shareholders 1 The literature suggests that the number of large publicly listed firms which are family-owned varies from country to country (Pedersen and Thomsen, 1997; Roe, 1994). Further, in some countries, family-owned firms dominate the country's stock market, meaning that the market value of equity of family-owned firms is substantially higher in comparison to that of non-family-owned firms in their respective countries (La Porta et al., 1999). This study will limit its focus to the country level antecedents of family ownership of large publicly listed firms across countries. 2 The two specific research questions about family ownership of large publicly listed firms are as follows. First, why are a number of large publicly listed firms in some countries family-owned? Second, in some countries, why do family-owned firms dominate the …