Hung, J. H., Chen, Y. P., and Hsu, K. T. 2010. Share Repurchase Activities in Family Firms: An Agency Theory Perspective. NTU Management Review, 21 (1): 171-204
Jung-Hua Hung, Associate Professor, Department of Business Administration, National Central University
Yi-Pei Chen, Assistant Professor, Department of Finance, Chung Yuan Christian University
Kai-Ting Hsu, Master, Department of Business Administration, National Central University
Abstract
We investigate the effects of the characteristics of family firms and the mechanisms of corporate governance on the share repurchase activities of such firms. The results indicate that there is a higher likelihood that shares will be repurchased in family firms than in nonfamily firms. The divergence between control rights and cash flow rights has an inverted ushaped relationship with the likelihood of share repurchases in family firms, implying a tradeoff between typeⅠ and typeⅡagency problems. We find that both family and nonfamily firms adjust their share repurchase programs in response to the degree of the divergence and the variety of agency problems. In addition, the presence of a family CEO and of that CEO also serving as chairperson of the board of directors in a family firm is positively related to the likelihood of share repurchasing. Outside directors provide superior monitoring of family firms.
Keywords
share repurchases family business agency theory