Family Firms, Banks and Firm Value: Evidence from Malaysia

Liew, Chee Yoong and Devi, S.Susela (2020): Family Firms, Banks and Firm Value: Evidence from Malaysia. Published in: Journal of Family Business Management , Vol. 11, No. 1 (2020): pp. 51-85.

Abstract

This paper examines the relationship between the number of domestic banks that the firm engages with and firm value and how this relationship is moderated by ownership concentration at low and very high level on a sample of Malaysian family and non-family firms. We find that there is a significant negative relationship between the number of domestic banks engaged by family firms, operating in industries where these firms do not have absolute monopoly, and firm value. However, there is no evidence that this significant negative firm value effect is stronger in family firms compared to non-family firms. Furthermore, the significant positive moderating effect of ownership concentration on this relationship within family firms in such industries is evident only at low level of ownership concentration. Interestingly, at very high level of ownership concentration, this significant positive moderating effect becomes negative. There is no evidence that these significant moderating effects are stronger in family firms compared to non-family firms. An implication of this research is that there is a need for the capital market regulators to introduce appropriate policies to deter family firms from having a close relationship with domestic banks as well as monitor the number of domestic banks engaged by such firms. There may be policy implications for consideration by the Central Bank of Malaysia as well.

• Item Type: MPRA Paper
• Language: English
• Keywords: corporate governance, banks, family firms, agency problems
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G3 - Corporate Finance and Governance > G39 - Other

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