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To merge, sell or liquidate? Socioemotional wealth, family control, and the choice of business exit
Jönköping University, Jönköping International Business School, JIBS, Business Administration. Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO).ORCID iD: 0000-0002-3742-542X
W.P. Carey School of Business, Arizona State University, Department of Management, Tempe, AZ, USA.
Jönköping University, Jönköping International Business School, JIBS, Business Administration. Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO).
Mays Business School, Texas A&M University, Department of Management, College Station, TX, USA.
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2019 (English)In: Journal of Management, ISSN 0149-2063, E-ISSN 1557-1211Article in journal (Refereed) Epub ahead of print
Abstract [en]

We take the perspective that considering the affective motives of dominant owners is essential to understanding business exit. Drawing on a refinement of behavioral agency theory, we argue that family-controlled firms are less likely than non-family-controlled firms to exit and tend to endure increased financial distress to avoid losses to the family’s socioemotional wealth (SEW) embodied in the firm. Yet, when confronted with different exit options and performance heuristics suggest that exit is unavoidable family firms are more likely to exit via merger, which we argue saves some SEW, although it is less satisfactory financially. In contrast, non-family firms are more likely to exit via sale or dissolution, options that are more prone to offer higher financial returns than mergers. Family and non-family firms thus show different orders of exit options. We find support for these arguments in a longitudinal matched sample of privately held Swedish firms.

Place, publisher, year, edition, pages
Sage Publications, 2019.
Keywords [en]
Family business; business exit; financial distress; behavioral agency model; socioemotional wealth
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-42191DOI: 10.1177/0149206318818723Local ID: IHHCeFEOISOAI: oai:DiVA.org:hj-42191DiVA, id: diva2:1267448
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Ragnar Söderbergs stiftelseAvailable from: 2018-12-03 Created: 2018-12-03 Last updated: 2019-01-30

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Chirico, FrancescoHellerstedt, KarinNordqvist, Mattias

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