Abstract
Family firms play an important role in global economy. There are almost 2/3 business are family firms in the world. And, family firms create average 70% to 90% gross world product every year. Family firms also make big impact on Taiwan’s economy since it occupy a large proportion, 62.95%, in listed and OTC companies. Amit and Villalonga (2006b) assume entity type is an exogenous variable, and distinguish among three fundamental elements in the definition of family firms, namely, ownership, control, and management to analyze family firms’ value (Tobin’s Q). And use governance index, non-family blockholder ownership, nonfamily outside directors, dividends/book value of equity, debt/market value of equity, market risk (beta), diversification dummy, R&D/sales, CAPX/PPE, assets, sales growth and age as explanatory variables to do multiple regression. In this paper, we use all listed/OTC companies in Taiwan during 1996 to 2013 to do research. We find that in our study period, there were 124 times that company changed their status between family and non-family firm. Among these, after switched their status, there were 62% companies had greater three years average Tobin’s Q than previous three years. And 77% companies had higher firm value if they changed status when their firm value was in the relative lower point. So, different to Amit and Villalonga (2006b), Chriaman et al.(2004) and Demsetz(1983), we consider entity type is an endogenous variable which determine by the stakeholders who maximum firm value. We continue to use explanatory variables in Amit and Villalonga (2006b), and remove governance index and add voting rights as explanatory variable. Then use endogenous model and sample selection model to analyze the effect of entity type on firm value.