The (Non-) Adoption of Shareholder Value by Family Firms

April 23 , 2010

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Abstract

In recent times, various scholars argued, the shareholder-oriented model of the corporation will triumph over its principal competitors. While an increasing dispersion of an espousal of shareholder value orientation among publicly traded German firms could be reported, it begs the question how far this development is also reflected in German family firms. This study tackled this question theoretically in the context of the expansion of a shareholder value orientation among Germany family firms with a special focus on cousin consortium and an owner manager beyond the third generation. The study disclosed that the adoption of such models significantly depends on the combination and interaction of power and interests in prospective adopters and that these interests also change over time, i.e. from the business founder and earlier generations to later generations in a cousin consortium. Beyond, the study highlights that the shift from a stakeholder value orientation to a shareholder value orientation eventually depend on the interests and influence of actors that make decisions in the firm. However, in the end family businesses work differently than non-family business by having mechanisms in their family governance that antagonizes the firms’ espousal to a shareholder value orientation. Keywords: shareholder value; family firms; family business; (non-) adoption; agency theory; family business governance; family governance.

Table of Contents

Table of Figures................................................................................................................. iii 1. Introduction..................................................................................................................1 1.1. 1.2. 1.3. 2. Problem Definition and Objective..........................................................................1 Clarification of Terminology...