Does Family Control Shape Diversification Decisions? : the Case of Chilean Firms

Abstract

This paper analyses how family control affects diversification decision on Chilean firms, its characteristics and limitations. Specifically, we introduce the potential agency frameworks such as pyramidal ownership, family, or business groups, as determinants of corporate prevention to diversify. From a dataset composed by 140 Chilean nonfinancial firms listed in the period 2008- 2015, we use an OLS method withed year-industry fixed effects. Results show that families tend to diversify less than non-family companies. Nonetheless, they show higher compromise with the segments already owned, showing a manifestation of the socioemotional wealth and the resource-based approach. Interestingly, family firms under business groups or pyramidal structures show positive tendencies to diversify, consistent with the wealth expropriation theories.