Multiple Family Offices and Stock Price Crash Risk

Drawing on principal–principal agency theory, we examine how multiple family offices (MFOs) affect stock crash risk of family firms owned and managed by at least two founding families or family lineages. In a study of publicly listed Korean firms where principal–principal agency conflicts are prevalent due to substantial control by family owner-managers, we find that MFOs help reduce stock crash risk by enhancing governance mechanisms that facilitate the alignment of divergent principal interests, especially in non-business-group-affiliated family firms and those facing unfavorable investment environments. Overall, we contribute toward the understanding of the governance function of family offices.