This paper explores the relationship between founding family ownership and stock market performance. Using a comprehensive sample of firms listed on the Swiss stock market over the period 2003-2013, we find that stock returns of family firms are significantly higher than those of non-family firms. Since families usually hold a large stake in the firm, we relate this result to the risk of potential expropriation faced by investors. This assumption is confirmed by the fact that the outperformance of family firms is related to the stake of the family. We also document that family firms tend to surprise the market more positively than other firms when they announce their earnings and that the magnitude of surprise is also related to the family stake. These results show that the abnormal stock returns of family firms can be explained by investors' skepticism and the fact that market participants are systematically positively surprised by firms where agency problems are potentially more severe.

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