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Regular version of the site

Article

Corporate control and firm value: The bright side of business groups

Journal of Family Business Strategy. 2017. Vol. 8. No. 2. P. 99-108.
Torres J. P., Jara Bertín M., Lopez Iturriaga F. J.

We analyze the effect of pyramidal ownership levels on the performance of Chilean firms by considering the
impact of business groups. Using an unbalanced panel of 1018 firm-year observations from 88 quoted firms for
the period from 2000 to 2014, we find that higher levels of separation between ownership rights and control
rights decrease performance in family firms that are not part of a business group. This result suggests that too
much separation of ownership and control rights in family firms can result in deviant incentives for family
members to extract private benefits. However, we also find that group affiliation reduces the negative impact of
the separation of ownership and control rights in family firms, which corroborates the bright side of internal
capital markets for these firms.