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Family Values: Ownership Structure, Performance and Capital Structure of Canadian Firms

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  • Michael R. King
  • Eric Santor

Abstract

This study examines how family ownership affects the performance and capital structure of 613 Canadian firms using a panel dataset from 1998 to 2005. In particular, we distinguish the effect of family ownership from the use of control-enhancing mechanisms. We find that freestanding family-owned firms with a single share class have similar market performance than other firms based on Tobin's q ratios, superior accounting performance based on ROA, and higher financial leverage based on debt-to-total assets. By contrast, family-owned firms that use dual-class shares have valuations that are lower by 17% on average relative to widely-held firms, despite having similar ROA and financial leverage. Finally, concentrated ownership by either a corporation or a financial institution does not significantly affect firm performance.

Suggested Citation

  • Michael R. King & Eric Santor, 2007. "Family Values: Ownership Structure, Performance and Capital Structure of Canadian Firms," Staff Working Papers 07-40, Bank of Canada.
    • Handle: RePEc:bca:bocawp:07-40
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    Keywords

    Financial markets; International topics;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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