Abstract
Family businesses are fundamental to nation building as they contribute towards the GDP of any country and are also major employment creators. Therefore, family business management is an emerging area of academic interest. In this regard, comparison between family and non-family businesses has become an important area of research. The present study analyses the performance of Indian family businesses in comparison to non-family business for firms listed on BSE 500 Index for a period of 11 years from 2005-2015. Any firm with 40% or more promoter or promoter group holding has been identified as a family business. Performance of family businesses was measured across 5 categories, viz, Profitability, Size, Market Position, Debt Position and Number of Employees. Within these 5 categories, comparison was done on the following 12 variables like Return on Net Worth (RONW), Return on Capital Employed (ROCE), Return on Total Assets (ROTA), Firm Size (SIZE), Total Assets (ASSETS), Total Revenue (REV), Market Capitalization (MACP), Current Ratio (CR), Quick Ratio (QR), Debt-Equity Ratio (DER), Interest Coverage Ratio (INTCOV) and Number of Employees (EMP), using independent t-test. It was found that in the Indian context, non-family business outperform family businesses in all 5 categories studied.
Highlights
Businesses are the main pillars of any economy and contribute to a large extent to the GDP of any nation
It shows that the mean Return on Net Worth (RONW) for family businesses is at 17.28 and that of non-family businesses is at 18.23
The present study analyses the performance of family businesses in comparison to non-family business for firms listed on BSE 500 Index for a period of 11 years from 2005-2015
Summary
Businesses are the main pillars of any economy and contribute to a large extent to the GDP of any nation. Businesses are deep-rooted in Asian cultures with Japan having the oldest family business in the world, presently run by the 40th generation. This region boasts of a high concentration of family businesses at about 85%. Two-thirds of India’s GDP and 90% of the gross industry output are contributed by family business in India. Two-thirds of India’s GDP and 90% of the gross industry output are contributed by family business in India3 This is the reason that family business management has gained a lot of prevalence as an area of academic interest
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