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Family Governance Signals and Heterogeneous Preferences of Investors

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  • Keith Duncan
  • Tim Hasso

Abstract

The authors explore if investors use signals of founding family governance (ownership, involvement in management, board representation) when making investment choices in an experimental setting. The authors link the literature on heterogeneous preferences of investors to signaling theory, and apply it in the context of founding family governance by exploring the presence of investor clusters with varying utility functions with respect to founding family governance. The authors show that nonprofessional investors use these signals in their investment choices. Latent class analysis identifies 3 distinct clusters within our sample that have conflicting utility curves with respect to founding family governance.

Suggested Citation

  • Keith Duncan & Tim Hasso, 2018. "Family Governance Signals and Heterogeneous Preferences of Investors," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 19(4), pages 381-395, October.
    • Handle: RePEc:taf:hbhfxx:v:19:y:2018:i:4:p:381-395
    DOI: 10.1080/15427560.2018.1405267
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    Cited by:

    1. Naciye Sekerci & Jamil Jaballah & Marc van Essen & Nadine Kammerlander, 2022. "Investors’ Reactions to CSR News in Family Versus Nonfamily Firms: A Study on Signal (In)credibility," Entrepreneurship Theory and Practice, , vol. 46(1), pages 82-116, January.
    2. Martin Tao-Schuchardt & Frederik J. Riar & Nadine Kammerlander, 2023. "Family Firm Value in the Acquisition Context: A Signaling Theory Perspective," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1200-1232, July.

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