{"title":"Family performance following share repurchases, information asymmetry and interest alignment","authors":"","doi":"10.1016/j.iref.2024.103587","DOIUrl":null,"url":null,"abstract":"<div><p>Little attention has been paid to how the information asymmetry, agency costs of free cash flow and the controller involvement in the board contribute to the difference in the performance between family and non-family firms following share repurchase announcements. This study aims to make clear the above associations. This study uses OLS multiple regressions to examine the difference in the operating and market performance between family and non-family firms over two years following the repurchase announcements in a sample that contains 3800 announcements over the period 2000 and 2017. We find that family firms have better performance than non-family firms. We also find that free cash flow is positively associated with performance, and the association between performance and free cash flow is weaker for family firms than for non-family firms. Furthermore, these findings become increasingly significant when family controllers have a lower degree of involvement. Our results indicate that family firms, especially those with a lower degree of controller involvement, prefer repurchases to mitigate information asymmetry and increase interest alignment.</p></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":null,"pages":null},"PeriodicalIF":4.8000,"publicationDate":"2024-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1059056024005793/pdfft?md5=b72b556d942ea2867206293a74bc7d4d&pid=1-s2.0-S1059056024005793-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Economics & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1059056024005793","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Little attention has been paid to how the information asymmetry, agency costs of free cash flow and the controller involvement in the board contribute to the difference in the performance between family and non-family firms following share repurchase announcements. This study aims to make clear the above associations. This study uses OLS multiple regressions to examine the difference in the operating and market performance between family and non-family firms over two years following the repurchase announcements in a sample that contains 3800 announcements over the period 2000 and 2017. We find that family firms have better performance than non-family firms. We also find that free cash flow is positively associated with performance, and the association between performance and free cash flow is weaker for family firms than for non-family firms. Furthermore, these findings become increasingly significant when family controllers have a lower degree of involvement. Our results indicate that family firms, especially those with a lower degree of controller involvement, prefer repurchases to mitigate information asymmetry and increase interest alignment.
期刊介绍:
The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.