Family Ownership and Tunneling Effect in South Asian, Lower-Middle Income Economies

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Abstract

This research studies the impact of family ownership (FOWN) on tunneling (TUN), while corporate governance (CGI) moderates this relationship. After reviewing the extensive literature, the relationship of family ownership with tunneling and the moderating role of corporate governance has been established. To investigate the empirical status of the hypotheses, data from 198 non-financial firms for 14 years for the period 2006-2019 has been gathered from the Pakistan Stock Exchange and Dhaka Stock Exchange. Generalised Method of Moments (GMM) has been applied to address the problem of endogeneity. The results depict that family ownership has a negative relationship with tunneling (propping). Moreover, corporate governance also shows the moderating role in the influence of family ownership on tunneling. The results of the empirical study provide insight to investors, regulators and policymakers so they may formulate strategies and establish policies to protect the rights of minority shareholders.

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