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Influence of family-centered goals on dividend policy in family firms: A socioemotional wealth approach

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Abstract

Socioemotional wealth (SEW) preservation is likely to be a key determinant for family firms when shaping their dividend policy. This paper analyzes how family-centered goals reflected by SEW can influence dividend policy in private family firms and explores how family involvement in management, generational stage, and firm hazard might moderate these relationships. Results indicate a negative association between SEW preservation and both the likelihood of giving dividends and the amount of dividend paid. This negative relationship is stronger when the CEO is a family member, in early generational stages and when the firm faces greater performance hazard. The amount of dividend paid is also lower when there are family members in other top management positions apart from the CEO. The evidence provided thus suggests that the existing heterogeneity in dividend policy in privately held family firms is strongly driven by differences in SEW priorities.

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Notes

  1. First, a Cronbach Alpha of 0.880, reliability coefficient RHO of 0.905, and composite reliability (CR) of 0.941 provide support for reliability (Fornell and Larcker 1981). Second, as regards convergent validity, the index of average variance extracted (AVE) for family continuity is 0.666, and 0.534 for family enrichment, exceeding the 0.50 cutoff criteria (Hair et al. 2006). Third, discriminant validity is verified since the square root of AVE of each first-order factor (0.816 and 0.737 for the first and second factor, respectively) is higher than the correlation among these two factors (0.694). Furthermore, as shown in Table 2, CFA results suggest that both the second-order factor and the correlated two-factor models fit the data significantly better than the alternative one-factor model (all eight items are combined).

  2. Following Vandemaele and Vancauteren (2015), the empirical models do not consider profitability measures (such as return on assets, ROA, or return on equity, ROE), in our case, due to potential multicollinearity problems with the existing control variables.

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Acknowledgements

Financial support from the Spanish Ministry of Science, Innovation and Universities (Project ECO2017-84209-P) and the Fundación Cajamurcia (Spain) is acknowledged. The authors also thank participants at the 19th Annual Conference of the European Academy of Management (EURAM 2019) for their insightful suggestions.

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Correspondence to María Belda-Ruiz.

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Belda-Ruiz, M., Sánchez-Marín, G. & Baixauli-Soler, J.S. Influence of family-centered goals on dividend policy in family firms: A socioemotional wealth approach. Int Entrep Manag J 18, 1503–1526 (2022). https://doi.org/10.1007/s11365-021-00741-x

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