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 non-family firms. The divergence between control rights and cash flow rights has an inverted u-shaped relationship with the likelihood of share repurchases in family firms, implying a tradeoff between typeⅠ and typeⅡagency problems. We find that both family and non-family 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.