Family control, expropriation, and investor protection: A panel data analysis of Western European corporations

• We examine the joint effect of family control and investor protection on value.
• The relation between family control and firm value follows an inverted U-shape.
• Family firms incur a value discount when family stockholdings exceed 50%.
• The nonlinear effect is due to family firms from strongly protective environments.
• When investor protection is weak, family control has a positive impact on value.

We investigate whether the value impact of family control in Western European firms depends on country-level investor protection. To this aim, we account for ownership–value nonlinearities. Supporting that the risk of expropriation increases with high ownership concentration, we find an inverted U-shape relation between family control and firm value. Family firms incur a value discount when family equity holdings exceed approximately 50%. The nonlinear effect of family control is attributable to family firms from a strongly protective environment. When investor protection is weak, family control has a positive impact on firm value regardless of the ownership concentration level.