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Socioemotional wealth’s implications in the calculus of the minimum rate of return required by family businesses’ owners

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Abstract

This paper demonstrates that the minimum rate of return (k e ) required by family business shareholders is inversely related to the emotional endowment presented in these firms. After reviewing the socioemotional wealth (SEW) literature, we find empirical support to justify that different SEW dimensions influence k e . Findings from a population of 207 family firms show that the identification of family members with the firm and the renewal of family bonds with the firm through dynastic succession have consistently negative impacts on k e , while family control and influence have significantly positive impacts on k e .

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Notes

  1. Economic Risk Investors (ERIs) are defined as undiversified investors who risk all or most of their resources in a company that is the essence of their business, without a well-known diversification policy and, simultaneously, lacking liquidity.

  2. Purely Financial Investors are investors who use the market as a means of diversification and liquidity for their portfolios and who will seek to cover the range of all securities proportionate to their market participation.

  3. This concept was defined by Knetsch and Sinden (1984) and by Knez et al. (1985) as the “minimum selling price” at which an individual would be willing to sell an endowed good.

  4. SABI is an economic and financial dataset, the data from which were compiled by Informa D&B in collaboration with Bureau Van Dijk, including financial statements, ratios, activities, shareholders of more than 1.080.000 Spanish and 320.000 Portuguese companies (March 2011).

  5. Financial services except for insurance and pension funding.

  6. Insurance, reinsurance and pension funding, except for compulsory social security.

  7. Auxiliary activities for financial services and insurance.

  8. Partnership activities.

  9. Other personal services.

  10. Extraterritorial organizations’ activities.

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  1. University of Almería, Ctra. Sacramento s/n, La Cañada de San Urbano, 04120, Almería, Spain

    Mª José Martínez Romero & Alfonso A. Rojo Ramírez

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  1. Mª José Martínez Romero
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  2. Alfonso A. Rojo Ramírez
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Correspondence to Mª José Martínez Romero.

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Martínez Romero, M.J., Rojo Ramírez, A.A. Socioemotional wealth’s implications in the calculus of the minimum rate of return required by family businesses’ owners. Rev Manag Sci 11, 95–118 (2017). https://doi.org/10.1007/s11846-015-0181-9

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