Firm value effects of family corporate group affiliation in the Philippines

• Main Authors: Del Mundo, Daniel Jan E., Kho, Evann Sanders F., Limlingan, Ricky F., See, Joahnna T.
• Format: text
• Language: English
• Published: Animo Repository 2007
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14763
• Institution: De La Salle University

Corporations have come up with governance mechanism to reduce the costs associated with management self-dealing the most common perhaps is through family block ownership. Studies have shown that ownership yields the positive effect of reducing the owner-manager conflict of interests, but it also yields the negative effect of minority shareholder expropriation and suboptimal management enhancement. These benefits and cost offset each other, and the net effect on value depends on the degree of ownership concentration in the firm. However, such studies on the ownership-value link in the Philippines remain scant. Using panel data from 2002-2006 for 164 firms listed in the Philippine Stock Exchange, we find that ownership concentration has a positive nonlinear effect on value. We also find that family group ownership has a negative nonlinear effect on firm value. From these results, we posit that expropriation exists in group-affiliated firms. Overall, our findings add evidence to the lack of monitoring from legal and institutional mechanisms in the Philippines, which give incentives for groups to attract benefits at the expense of minority stockholders.