In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on clustered standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper examines the different methods used in the literature and explains when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.

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Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

1. Introduction and Overview. 2. Detecting Influential Observations and Outliers. 3. Detecting and Assessing Collinearity. 4. Applications and Remedies. 5. Research Issues and Directions for Extensions. Bibliography. Author Index. Subject Index.

Regression Diagnostics: Identifying Influential Data and Sources of Collinearity

We investigate the relation between founding-family ownership and firm performance. We find that family ownership is both prevalent and substantial; families are present in one-third of the S&P 500 and account for 18 percent of outstanding equity. Contrary to our conjecture, we find family firms perform better than nonfamily firms. Additional analysis reveals that the relation between family holdings and firm performance is nonlinear and that when family members serve as CEO, performance is better than with outside CEOs. Overall, our results are inconsistent with the hypothesis that minority shareholders are adversely affected by family ownership, suggesting that family ownership is an effective organizational structure. FOUNDING-FAMILYOWNERSHIPAND CONTROL in public U.S. firms is commonly perceived as a less efficient, or at the very least, a less profitable ownership structure than dispersed ownership. Fama and Jensen (1983) note that combining ownership and control allows concentrated shareholders to exchange profits for private rents. Demsetz (1983) argues that such owners may choose nonpecuniary consumption and thereby draw scarce resources away from profitable projects. Shleifer and Vishny (1997) observe that the large premiums associated with superiorvoting shares or control rights provide evidence that controlling shareholders seek to extract private benefits from the firm. More generally, firms with large, undiversified owners such as founding families may forgo maximum profits because they are unable to separate their financial preferences with those of outside owners.1 Families also often limit executive management positions to family

https://www.jstor.org/stable/pdfplus/3094581.pdf

Founding-Family Ownership and Firm Performance: Evidence from the S&P 500

A Treatise on the Family. G. S. Becker. Cambridge, MA: Harvard University Press. 1981. Gary Becker is one of the most famous and influential economists of the second half of the 20th century, a fervent contributor to and expounder of the University of Chicago free-market philosophy, and winner of the 1992 Nobel Prize in economics. Although any book with the word "treatise" in its title is clearly intended to have an impact, one coming from someone as brilliant and controversial as Becker certainly had such a lofty goal. It has received many article-length reviews in several disciplines (Ben-Porath, 1982; Bergmann, 1995; Foster, 1993; Hannan, 1982), which is one measure of its scholarly importance, and yet its impact is, I think, less than it may have initially appeared, especially for scholars with substantive interests in the family. This book is, its title notwithstanding, more about economics and the economic approach to behavior than about the family. In the first sentence of the preface, Becker writes "In this book, I develop an economic or rational choice approach to the family." Lest anyone accuse him of focusing on traditional (i.e., material) economics topics, such as family income, poverty, and labor supply, he immediately emphasizes that those topics are not his focus. "My intent is more ambitious: to analyze marriage, births, divorce, division of labor in households, prestige, and other non-material behavior with the tools and framework developed for material behavior." Indeed, the book includes chapters on many of these issues. One chapter examines the principles of the efficient division of labor in households, three analyze marriage and divorce, three analyze various child-related issues (fertility and intergenerational mobility), and others focus on broader family issues, such as intrafamily resource allocation. His analysis is not, he believes, constrained by time or place. His intention is "to present a comprehensive analysis that is applicable, at least in part, to families in the past as well as the present, in primitive as well as modern societies, and in Eastern as well as Western cultures." His tone is profoundly conservative and utterly skeptical of any constructive role for government programs. There is a clear sense of how much better things were in the old days of a genderbased division of labor and low market-work rates for married women. Indeed, Becker is ready and able to show in Chapter 2 that such a state of affairs was efficient and induced not by market or societal discrimination (although he allows that it might exist) but by small underlying household productivity differences that arise primarily from what he refers to as "complementarities" between caring for young children while carrying another to term. Most family scholars would probably find that an unconvincingly simple explanation for a profound and complex phenomenon. What, then, is the salient contribution of Treatise on the Family? It is not literally the idea that economics could be applied to the nonmarket sector and to family life because Becker had already established that with considerable success and influence. At its core, microeconomics is simple, characterized by a belief in the importance of prices and markets, the role of self-interested or rational behavior, and, somewhat less centrally, the stability of preferences. It was Becker's singular and invaluable contribution to appreciate that the behaviors potentially amenable to the economic approach were not limited to phenomenon with explicit monetary prices and formal markets. Indeed, during the late 1950s and throughout the 1960s, he did undeniably important and pioneering work extending the domain of economics to such topics as labor market discrimination, fertility, crime, human capital, household production, and the allocation of time. Nor is Becker's contribution the detailed analyses themselves. Many of them are, frankly, odd, idiosyncratic, and off-putting. …

A Treatise on the Family

Remote sensing imagery needs to be converted into tangible information which can be utilised in conjunction with other data sets, often within widely used Geographic Information Systems (GIS). As long as pixel sizes remained typically coarser than, or at the best, similar in size to the objects of interest, emphasis was placed on per-pixel analysis, or even sub-pixel analysis for this conversion, but with increasing spatial resolutions alternative paths have been followed, aimed at deriving objects that are made up of several pixels. This paper gives an overview of the development of object based methods, which aim to delineate readily usable objects from imagery while at the same time combining image processing and GIS functionalities in order to utilize spectral and contextual information in an integrative way. The most common approach used for building objects is image segmentation, which dates back to the 1970s. Around the year 2000 GIS and image processing started to grow together rapidly through object based image analysis (OBIA - or GEOBIA for geospatial object based image analysis). In contrast to typical Landsat resolutions, high resolution images support several scales within their images. Through a comprehensive literature review several thousand abstracts have been screened, and more than 820 OBIA-related articles comprising 145 journal papers, 84 book chapters and nearly 600 conference papers, are analysed in detail. It becomes evident that the first years of the OBIA/GEOBIA developments were characterised by the dominance of ‘grey’ literature, but that the number of peer-reviewed journal articles has increased sharply over the last four to five years. The pixel paradigm is beginning to show cracks and the OBIA methods are making considerable progress towards a spatially explicit information extraction workflow, such as is required for spatial planning as well as for many monitoring programmes.

Object based image analysis for remote sensing

Creditor reliance on accounting-based debt covenants suggests that debtors are potentially concerned with board of director characteristics that influence the financial accounting process. In a sample of S&P 500 firms, we find that the cost of debt financing is inversely related to board independence and board size. We also examine the impact of audit committee characteristics on corporate yields spreads as audit committees are the direct mechanism that boards use to monitor the financial accounting process. We find that fully independent audit committees are associated with a significantly lower cost of debt financing. Similarly, yield spreads are also negatively related to audit committee size and the number of audit committee meetings. Overall, these results provide market-based evidence that boards and audit committees are important elements affecting the reliability of financial reports.

Board Characteristics, Accounting Report Integrity, and the Cost of Debt

Founding family ownership and the agency cost of debt

Board characteristics, accounting report integrity, and the cost of debt

Recent research indicates that founding families have substantial stakes in roughly one-third of the largest U.S. companies and, in these firms, control nearly twenty percent of all board seats. Burkart, Panunzi, and Shleifer (2003) suggest that a key element in the desirability of family ownership is the ability to limit the family's expropriation of minority shareholders. Consistent with this notion, we find that the most valuable public firms are those in which independent directors balance family board representation. In contrast, in firms with continued founding family ownership and relatively few independent directors, firm performance is significantly worse than in non-family firms. We also document that moderate family board presence provides substantial benefits to the firm. Additional tests suggest that families often seek to minimize the presence of independent directors, while outside shareholders seek independent director representation. These findings highlight the importance of independent directors in mitigating shareholder-shareholder conflicts and suggest that considering shareholder-shareholder conflicts provides a richer setting in which to explore corporate governance. Note: A list of the firms classified as family and non-family firms is available from the authors.

David M. Reeb

Papers

Founding-Family Ownership and Firm Performance: Evidence from the S&P 500

Board Characteristics, Accounting Report Integrity, and the Cost of Debt

Founding family ownership and the agency cost of debt

Board characteristics, accounting report integrity, and the cost of debt

Board Composition: Balancing Family Influence in S&P 500 Firms