The effect of family control on value and risk-taking in Mexico: A socioemotional wealth approach

Abstract

We construct an analytical framework to incorporate agency and stewardship perspectives, and the concept of socioemotional wealth (SEW), to analyse the effect of family participation on firm value and corporate risk-taking in Mexico. We find family firms enjoy higher value and tolerate higher levels of risk than non-family concerns. This differential becomes more important in more highly valued firms and more risk tolerant firms. Whereas the differential is also positively associated with the cash ownership of controlling families, the observed value/ risk effects entrench at higher levels of family ownership (i.e. above 40%-50%). We test whether the risk-taking preference of family firms is a mixture of two types of risk, performance hazard risk, which captures the familial desire to preserve SEW; and venturing risk, which firms take in expectation of improving future performance. Family firms seem to take more performance hazard risk independently of their cash flow ownership, which suggests that family firms perceive patrimony as a means of safeguarding resources for heirs, which raises tolerance to performance hazard risk. Firm value increases when firms follow good corporate governance practices.

Read between the lines: Board gender diversity, family ownership, and risk‐taking in Indian high‐tech firms

“…So risky decisions are generally avoided to protect the family wealth (Naldi, Nordqvist, Sjöberg, & Wiklund, 2007; Souder, Zaheer, Sapienza, & Ranucci, 2017). Second, their investment is tied closely to their firm that makes the diversification of their investment portfolios difficult (Poletti‐Hughes & Williams, 2017; Tsao & Lien, 2013). Consequently, the undiversified nature of investment portfolio leads family firms to take less risk.…”

“…Third, family businesses are more geared to long‐term survival and aim to keep the business within the hands of the family. This may lead family firms to risk‐avoiding decisions as higher risk could endanger the goal of business succession and business survivability (Poletti‐Hughes & Williams, 2017; Hiebl, 2012). We formally incorporate this idea by focusing on the moderating role of family ownership structure in the relationship between board gender diversity and risk‐taking in high‐tech sector.…”

Influence of Family Culture on Enterprise Risk Management in Brazilian Companies

“…With regard to risk management practices as a MCS mechanism, the literature shows some evidence that family influence (ownership, composition of the board of directors, management, etc.) on daily work can result in lower adoption of formal processes to identify, evaluate, respond to, and communicate risk (Acquaah, 2013;Bernhoeft & Gallo, 2003;Hiebl, Duller, & Feldbauer-Durstmüller, 2015;Kellermanns, 2005;Naldi et al, 2007;Poletti-Hughes & Williams, 2017;Zahra, 2005).…”

“…Evidence indicates that the level of family involvement, through experience, positively influences the perception of the various risks present in the company (Acquaah, 2013;Bernhoeft & Gallo, 2003;Hiebl et al, 2015;Kellermanns, 2005;Naldi et al, 2007;Poletti-Hughes & Williams, 2017;Zahra, 2005), which may result in a positive relation between the family's experience and risk management practices.…”

Efeito da gestão familiar na avaliação do desempenho da empresa: evidências do Brasil

“…Nestas empresas, os laços familiares podem criar condições para a obtenção de um desempenho diferenciado em comparação com as não familiares (Martínez, Stöhr & Quiroga, 2007;Shyu, 2011;Erbetta et al, 2013). Embora haja evidências na literatura da influência familiar no desempenho das empresas (Sharma, Chrisman, & Chua, 1997;Anderson & Reeb, 2003;Martínez et al, 2007;Amran & Ahmad, 2009;Bonilla, Sepulveda & Carvajar, 2010;Shyu, 2011;Din & Javid, 2011;Mazzi, 2011;Speckbacher & Wentges, 2012;Erbetta et al, 2013;Hamberg, Fagerland, & Nilsen, 2013;Pukthuanthong, Walker, Thiengtham, & Du, 2013;Muttakin, Khan, & Subramaniam, 2014;Ayranci, 2014;Vieira, 2014;Politelo, Kaveski, Chiarello, & Silva, 2014;Halili, Saleh, & Zeitun, 2015;Hiebl et al, 2015;Beuren et al, 2016;Kang & Kim, 2016;Poletti-Hughes & Williams, 2017;Saleh, Halili, Zeitun & Salim, 2017;Costa, Macedo, Yokoyama & Almeida, 2017), tal configuração merece ser melhor explorada, visto que a presença de familiares na gestão implica em melhores desempenhos e sustentação da vantagem competitiva (Mazzi, 2011;Speckbacher & Wentges, 2012). Além disso, a família pode exercer influência e controle na gestão da empresa, ter envolvimento direto nas decisões, tanto estratégicas quanto operacionais (Gómez-Mejía et al, 2007;Sciascia, Mazzola & Kellermanns, 2014).…”