Responsible ownership behaviors and financial performance in family owned businesses

Abstract

PurposeThis study aims to examine the relationship of ownership behaviors with both firm financial performance and family assets in the context of family owned businesses.Design/methodology/approachThe research framework allows for a comparison of predictions drawn from social psychological, economic, and management literature. The hypotheses are tested using ordinary least squares hierarchical regression analyses conducted on a nonrandom sample of medium and large family businesses.FindingsThe empirical results identify four potential categories of responsible ownership behaviors: professionalism, active governance, owner as resource, and basic duties. Professionalism (i.e. acting in accordance with expectations and agreements among owners and in relation to the firm) is the only behavior positively associated with financial performance. The effect of active governance (i.e. the monitoring of management) on financial performance is moderated by business size – this behavior has a negative effect on the dependent variable for all but the largest firms in the sample.Research limitations/implicationsThe limitations of the current research and directions for further research include issues related to sampling, other possible variables to be explored, and alternative validations of the responsible ownership concept.Practical implicationsThis study has direct practical implications for owners' actions in relation to one another and with other actors in the firm.Originality/valueThis study contributes to existing research on governance by developing a better understanding of the role of owners and their influence on the firm.

Responsible family ownership in small‐ and medium‐sized family enterprises: an exploratory study

“…For example, these firms may not need boards of directors (Filatotchev ; Minichilli et al . ; Berent‐Braun & Uhlaner ).…”

“…(: 234) infer that higher commitment is evidenced by more responsible behaviour, stating that ‘owners with stronger commitment are likely in turn to behave more responsibly toward the firm’. Berent‐Braun & Uhlaner (: 23) identify the following four types of ownership behaviour: professionalism, active governance, owners as a resource and the fulfilment of basic ownership duties.…”

“…Because of the dearth of direct measurements of owner attitudes and behaviours -a common shortcoming in corporate governance research (Huse 2005;Uhlaner et al 2007aUhlaner et al , 2007b) -certain empirical studies have recently applied these concepts to family firms. Berent-Braun & Uhlaner (2012b) analyse the effects of responsible ownership behaviours on the financial performance of familyowned large firms. The same authors also focus on family governance practices in large firms and identify different practices related to the family constitution, including a family code of conduct, clear selection and accountability criteria, family councils, formal family communication mechanisms and family reunions (Berent-Braun & Uhlaner 2012a).…”

“…In this case, no monitoring system is required to ensure that the manager does not act as a free rider. For example, these firms may not need boards of directors (Filatotchev 2006;Minichilli et al 2009;Berent-Braun & Uhlaner 2012b).…”

“…The second type of ownership behaviour, active governance, is the monitoring of management by owners. Small-and medium-sized family enterprises are directly governed by a family member or a group of family members; therefore, no monitoring system is required to ensure that the manager does not act as a free rider (Filatotchev 2006;Minichilli et al 2009;Berent-Braun & Uhlaner 2012b).…”