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Spending Less Time with the Family: The Decline of Family Ownership in the UK

Julian Franks

City of London Corporation Professor of Finance, London Business School

Colin Mayer

Peter Moores Professor of Management Studies, Sad Business School, University of Oxford

Stefano Rossi

London Business School

 

 

Abstract

Family ownership was rapidly diluted in the twentieth century in Britain.  Issuance of equity in the process of acquisitions was the main cause.  In the first half of the century, it occurred in the absence of minority investor protection and relied on directors of target firms protecting the interests of shareholders.  Families were able to retain control by occupying a disproportionate number of seats on the boards of firms.   However, in the absence of large stakes, the rise of hostile takeovers and institutional shareholders made it increasingly difficult for families to maintain control without challenge.  Potential targets attempted to protect themselves through dual class shares and strategic share blocks but these were dismantled in response to opposition by institutional shareholders and the London Stock Exchange.  The result was a regulated market in corporate control and a capital market that looked very different from its European counterparts.  Thus, while acquisitions facilitated the growth of family controlled firms in the first half of the century, they also diluted their ownership and ultimately their control in the second half.

 

Key words: Family ownership, control, takeovers

JEL classification: G32

 

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