Family founders, firm value and founder’s companions

Purpose The family literature considers the founder’s presence in the business an important factor that increases the firm’s value. Nevertheless, the individuals involved in the team of founder since inception also have potent influence over the value of firm. We investigate the role of family founder on firm value, and moderating influence of the trusted individuals (which we called companions) on this relationship. Design/methodology/approach We utilize a sample of non-financial firms listed on the Pakistan Stock Exchange. To test the hypotheses, the ordinary least squares regression analysis was applied. Further, a generalized method of moments estimation, two stage least squares and difference in difference analysis was employed to check for the robustness of the results. Using the lens of agency theory and social identity theory, our findings indicate that the presence of the family founder positively influences the firm’s value. Moreover, our results suggest that the founder’s companions play a pivotal role in the improvement of firm value, and therefore their presence further strengthens this relationship. Findings Using the lens of agency theory and social identity theory, our findings indicate that the presence of the family founder positively influences firm value. Moreover, our results suggest that the founder’s companions play a pivotal role in enhancing firm value, and therefore their presence further strengthens this relationship. Research limitations/implications In addition to that, our study is not without limitations. However, these limitations may serve as future directions for the upcoming researchers. Being an emerging economy, the culture of Pakistan not only differs from developed countries, but also differ from other emerging countries due to various cultural, social and demographic factors. Future studies may replicate this model in other emerging and developed markets to determine the generalizability of the results. Practical implications Our study enriches the family business literature by highlighting the positive influence of family founders on firm value, and prominent role of the founder’s companions on the firm value which was hitherto unaddressed. Originality/value In the context of emerging economies, our findings provide insight to the investors and policy makers into the family founder’s strategic and social behavior.