Family Matters?: A Cross‐National Analysis of the Performance Implications of Family Ownership

Abstract

Manuscript Type: EmpiricalResearch Question/Issue: This study makes use of a large multi-country sample to examine how the market performance of family firms is affected by national context. Research Findings/Insights: We find that Tobin's Q among family firms is significantly lower than that of non-family firms across 33 countries. In examining these effects, results suggest that legal context and national culture influence the performance implications of publicly traded family firms, serving to mitigate some of the generally negative impact. Theoretical/Academic Implications: We find that national context is an important contingency in determining the family's ability and willingness to exploit minority shareholder wealth. Building upon our results, future research can focus on how formal and informal institutions may be substitutes for each other. Our results help explain why prior empirical research provides conflicting results regarding the impact of family governance on firm valuation. Practitioner/Policy Implications: Our findings suggest that the performance implications of family firms are contingent on legal protections, belief in the impartiality of the legal system, and culture. Given wide variations in these measures across countries, the appropriate mechanisms to strengthen investor protection will not follow a one-size fits all approach.

The characteristics of family firms: exploiting information on ownership, kinship, and governance using total population data

“…Table 6 shows that the average and median values for family firms are significantly smaller than for private non-family firms in terms of employment, sales, and total assets. This result is consistent with the findings of Backman and Palmberg (2015) and Dow and McGuire (2016). The average and median age of family firms is also greater.…”

Turkish delight a public affairs study on family business: The influence of owners in the entrepreneurship orientation of family‐owned businesses

“…Studies also indicate that, in family businesses, family ownership and family leadership are key control mechanisms (Gómez-Mejía, Nuñez-Nickel, & Gutierrez, 2001;Jiang & Peng, 2010;Villalonga & Amit, 2006) for both succession process and the performance (Lissoni, Pereira, Almeida & Serra, 2010;Ward, 1987). Additionally, family business owners' succession intention will not only be solely affected by their wills but also by the institutional environment (Zhou, Hu, Yao & Qin, 2016) like culture, capital market characteristics, and legal frameworks (Dow & McGuire, 2016).…”

“…Through these connections, business groups coordinate, delegate, survive, and achieve their targets. Family business ownership is probably the most dominant ownership structure found in many national contexts and a key characteristic that distinguishes the structure of family governance from that of nonfamily firms (Chung & Chan, 2012; Dow & McGuire, ). This leads family members to preserve and control their values and beliefs and disseminate these to other family members (Zahra, ; Gupta & Levenburg, ).…”

How Do Family Firms Launch New Businesses? A Developmental Perspective on Internal Corporate Venturing in Family Business

“…Existing literature shows that the characteristics of the legal system influence family firms’ choices, behaviors, and performance (Barrédy ; Dow and McGuire ; Jiang and Peng ). Common law legal systems, for example, are more flexible in defining the boundaries of the family compared to civil law ones in which, instead, family members run the risk to be trapped in ownership (Barrédy ).…”

“…Particularly, family‐CEO tenure and external board members provide a quite comprehensive picture of a family firm's governance (Le Breton‐Miller, Miller, and Bares ; Sciascia and Bettinelli ). Moreover, the national legal system (common vs. civil law) has been recently indicated as an important source of family business heterogeneity and entrepreneurial conduct (Barrédy ; Dow and McGuire ; Jiang and Peng ).…”