Peter K. Pham

Family Business Groups around the World: Financing Advantages, Control Motivations and Organizational Choices

Using a dataset of 28,635 firms in 45 countries, this study investigates the motivations for family-controlled business groups. We provide new evidence consistent with the argument that particular group structures emerge not only to perpetuate control, but also to alleviate financing constraints at the country and firm levels. At the country level, family groups, especially those structured as pyramids, are more prevalent in markets with limited availability of capital. At the firm level, investment intensity is greater for firms held in pyramidal rather than in horizontal structures, reflecting the financing advantages of the former. Within a pyramid, internal equity funding, investment intensity, and firm value all increase down the ownership chain. However, group firm performance declines when dual-class shares and cross shareholdings are employed as additional control-enhancing mechanisms. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

This study constructs a firm-level measure of large foreign ownership (LFO) and investigates its impact on stock return volatility in 31 emerging markets. We find a negative relationship between LFO and volatility, even after controlling for potential endogeneity and the impact of major domestic shareholders. This suggests a stabilizing role of LFO in emerging markets, which is consistent with previous suggestions in the literature on the strong commitments and potential monitoring role of large foreign shareholders. Overall, our study highlights the importance of recognizing the heterogeneity among foreign investors and the benefits of large foreign shareholders to emerging stock markets.

Corporate Governance and Alternative Performance Measures: Evidence from Australian Firms

We examine the extent to which individual monitoring mechanisms enhance firm performance and shareholder value. We use a sample of Australian firms, from 1994 to 2003, to analyse the relationship between firm performance and corporate governance. This provides a long time series of governance data by international standards and allows us to study governance–performance dynamics over an extensive period. We use Stern Stewart & Co’s economic value added (EVA) as an alternative performance measure and provide a comparison to Tobin’s Q. However, similar to the international evidence, we do not find a significant relationship between either of the performance measures and corporate governance. Using various econometric techniques we show that our results are also robust to endogeneity biases that can arise in the governance–performance relation.

Corporate Governance and the Cost of Capital: Evidence from Australian Companies

The authors examine a sample of large Australian companies over a 10‐year period with the aim of analyzing the role that firm‐level corporate governance mechanisms such as insider ownership and independent boards play in explaining a companys cost of capital. The Australian corporate system offers a unique environment for assessing the impact of corporate governance mechanisms. Australian companies have board structures and mechanisms that are similar in design to Anglo‐Saxon boards while offering a striking contrast to those of German and Japanese boards. At the same time, however, the Australian market for corporate control is much less active as a corrective mechanism against management entrenchment than its U.S. and U.K. counterparts, making the role of internal governance mechanisms potentially more important in Australia than elsewhere. The authors report that greater insider ownership, the presence of institutional blockholders, and independent boards are all associated with reductions in the perceived risk of a firm, thereby leading investors to demand lower rates of return on capital. In so doing, the study provides evidence of the important role of corporate governance in increasing corporate values.

Creating Value by Changing the Old Guard: The Impact of Controlling Shareholder Heterogeneity on Firm Performance and Corporate Policies

Theory suggests that controlling shareholders can influence firm value through both shared benefits creation and private benefits consumption. Using negotiated control-block transfers from 31 countries, we look beyond ownership concentration and investigate how controlling shareholder heterogeneity influences the relative importance of these two effects. We document that a control transfer precipitates positive firm outcomes particularly when the vendor has maintained control over an extended period and the acquirer displays a strong incentive to engage in restructuring. In such cases, we observe a sustained positive price reaction, more focused corporate investments, lower leverage, higher operating efficiency, and superior long-term performance.

Internal Capital Markets in Family Business Groups During the Global Financial Crisis

This study investigates how family business group members’ investment decisions are affected by an exogenous shock, namely the 2008 Global Financial Crisis (GFC). Specifically, we investigate whether the internal capital markets in family business groups around the world alleviate the financial crisis-induced external financing constraints. We find that during the GFC the family group-affiliated firms on average cut investments by less than similar standalone firms. We also find that investments of group firms during the GFC become less sensitive to their own cash flows and more sensitive to the cash flows of other group members, especially those with greater financial slack, compared to the pre-crisis period. For a subsample of diversified groups, we propose an identification strategy, which shows that the post-crisis change in a group firm’s investment is determined by exogenous variations in its affiliated firms’ cash flows. Finally, we find that groups utilize equity primarily in the form of seasoned equity offerings (SEOs) to channel capital to affiliated firms during the GFC. The evidence highlights the important capital allocation role performed by the internal capital markets of business groups when external markets function poorly.

Fast and Scalable Access to Advance Resource Reservation Data in Future Cellular Networks

Increasing demand on the scarce radio spectrum indicates that availability of required radio resources (e.g. wireless bandwidth) at a given time and location will be less certain in the future. Resource uncertainty inhibits many future applications that require large amount of resources to be guaranteed at specific times and locations. In order to address the problem of resource uncertainty, these applications may need to reserve network resources in advance. However, in order to support percall advance reservation, the network must store, process, and access large volume of reservation data efficiently. In particular, the admission control functions must have fast and scalable access to these reservation data for making effective decisions regarding the acceptance and rejection of both immediate and future calls. In this paper, we propose a distributed reservation database architecture that features proactive processing and delivery of reservation data to admission control functions located in each radio base-station. To demonstrate the effectiveness of our architecture, we present results from a prototype experiment that compared the proposed proactive approach with the traditional query-based data delivery approach. With proactive approach, the response time of admission control was 20 times or more faster than traditional query-based approach in our experiments.

Why Do Family Business Groups Expand by Creating New Public Firms? The Role of Internal Capital Markets

Using data from 44 countries, we document a new channel through which a family business groups internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their IPO market access. This IPO support role is particularly valuable when groups find capital raising through SEOs less attractive due to control-retention concerns, and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a groups expansion goals, rather than its liquidation needs.