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Corporate governance in family firms - The Norwegian maritime sector

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The four papers in this thesis investigate corporate governance in family firms from differentangles, with emphasis on industry and industry networks. I divide the industry networks intosocial and commercial networks, where social networks are measured by interlocking boardsand commercial networks by investments in other firms in the same industry. Focus is on thegovernance structures in family firms, how industry and networks may be determinants offamily ownership, and the effect of family ownership and strong industry networks onfinancial performance in certain industries (such as the maritime industry). Two of the papersare theoretical papers and two are empirical papers. The empirical papers are based on thesame hand-collected dataset comprising 167 Norwegian listed companies from 1996-2005.The first paper - “Corporate Governance in Family firms” comprises a survey of the corporategovernance literature on family firms, paying attention to the unique issues in the governanceof these firms. I discuss different forms of ownership and how different agency contexts andbusiness environments may suit family ownership better than other ownership structures. Ialso discuss how firms can reap the benefits of family ownership, by using a relationalgovernance model, if there is an atmosphere of positive relationships, trust and shared visions.A relational governance model focuses on the social capital embedded in personal relationsbetween owners, managers and board members. A contractual governance model, however,focuses on finding the optimal incentives in the relations between owners and managers, inaddition to having greater focus on the monitoring role of the board. These two models maycomplement and supplement each other in a governance structure. The question is how thesedifferent governance models affect firms’ operations, decision-making, and competitiveness.The second paper - “The Effect of Industry Networks on Family Ownership” deals withpossible effects of industry networks on the prevalence of family firms in different industries.I discuss how various networks can be determinants of family ownership, in addition toelements like incentives, monitoring, and altruism, as well as firm, industry and nationspecific factors. I also discuss whether family firms can gain more from these industrynetworks than other firms due to a higher degree of ”thick trust”, strong owner-managerrelations and the use of a relational governance structure. This paper proposes that strongsocial and commercial networks affect the number of family firms in an industry, as a resultof the social capital embedded in these relations. Paper three - “Social and Commercial Networks as Determinants of Family Ownership - TheNorwegian Shipping Industry” is an empirical paper testing whether industry networks areamong the determinants of family ownership in the Norwegian shipping industry. The overallquestion is why family ownership is more prevalent in some industries, and which elementsthat influence this ownership structure. I focus on industry effects such as the number of firmsin an industry and the social and commercial industry networks between firms. These arepotential determinants of family ownership. I find that both industry and various industrynetworks have a significant and positive effect on family ownership in the shipping industry.The fourth paper - “Family Ownership, Networks and Financial Performance” takes up thequestion whether family ownership and various networks affect financial performance,measured by Tobin’s q and ROA lagged, or not. Earlier studies come to different conclusionsregarding the relationship between family ownership and firm performance, which may bedue to differences in the agency context of the studies. I add industry and industry networksas central variables to disentangle some of the contextual factors in this relationship. Thispaper argues that it is not necessarily the family ownership that affects performance, but howthis ownership is used in a strategic manner. Establishing and using networks are seemingly ameans of operation in some industries, sometimes with a positive effect on performance.

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Kristin Wallevik

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