Are Family Members Expropriated-Monitoring Shareholders? Non-Linear Evidence from the Saudi Arabia

Shehabaddin Abdullah A. Al-Dubai, Ku Nor Izah Ku Ismail, Noor Afza Amran

Abstract


ABSTRACT

As family businesses grow worldwide, the significant role of family shareholders on firm value becomes questionable. This study seeks to address this issue and provides new evidence on the non-linearity of family ownership-firm value relationship, based on 375 firm-year observations of 75 public listed companies in Saudi Arabia over five consecutive years (2007-2011). Interestingly, we provided evidence that the behavior of the Saudi families is changeable between expropriation and monitoring during the life of the business depending on the percentage of family ownership. We found sufficient evidence that the turning point occurs at the 28% family ownership. This confirmed the expropriated-monitoring behavior of family shareholders in their businesses. These results were robust with respect to different family definitions and analyses. Our findings suggested that investors should not undervalue Saudi family firms due to family ownership per se. At a certain degree of ownership, the benefits of Saudi family monitoring actually exceed the costs. The results suggested that there may be a need to encourage policy makers in Saudi Arabia to impose the full disclosure of firms’ ownership information, including the percentage of ownership and the identity of owners.

Keywords: Family business; family ownership; firm value; non-linearity; Saudi Arabia.

ABSTRAK

Pertumbuhan perniagaan keluarga yang pesat berkembang di seluruh dunia telah memberi kesan signifikan kepada persoalan pemegang saham keluarga ke atas nilai firma. Oleh itu, kajian ini ingin menjawab persoalan ini dan menunjukkan bukti baru hubungan ketidaklinearan pemilikan keluarga dengan hubungan nilai firma berdasarkan pemerhatian ke atas 375 firma dari 75 Syarikat Tersenarai Awam di Arab Saudi bagi lima tahun berturut-turut (2007-2011). Apa yang menarik, kajian ini mendapati tingkah laku keluarga Arab berubah-ubah sepanjang hayat perniagaan, bergantung kepada peratus pemilikan keluarga. Kajian mendapati bahawa arah perubahan bertukar pada 28% pemilikan. Ini membuktikan tingkah laku merampas-memantau di kalangan pemegang saham keluarga di dalam perniagaan masing-masing. Keputusan ini adalah mantap kerana beberapa definisi keluarga yang berbeza telah digunakan dan analisis telah dijalankan di dalam kajian ini. Penemuan kajian ini mencadangkan pelabur tidak perlu menilai rendah terhadap firma keluarga Arab Saudi dengan hanya melihat kepada pemilikan keluarga sahaja. Pada tahap pemilikan yang tertentu, manfaat pemantauan pemilikan keluarga Arab adalah melebihi kos. Keputusan menyarankan adalah perlu untuk menggalakkan penggubal polisi di Arab Saudi mengenakan pendedahan penuh ke atas firma berkaitan maklumat pemilikan termasuklah peratus pegangan pemilikan dan identiti pemilik.

Kata kunci: Perniagaan keluarga; pemilikan keluarga; nilai firma; ketidaklinearan; rampasan; pemantauan; Arab Saudi.


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