Corporate Governance and Firm Performance: A Comparative Analysis between Listed Family and Non-Family Firms in Japan

Kojima Koji,Le Tram,Bishnu Kumar Adhikary

doi:10.3390/jrfm13090215

Kojima Koji, Le Tram + Show 1 more

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https://doi.org/10.3390/jrfm13090215

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Abstract

This study aims to explore the relationship between corporate governance and financial performance of publicly listed family and non-family firms in the Japanese manufacturing industry. The study obtains data from Bloomberg over the period 2014–2018 and covers 1412 firms comprising of 861 non-family and 551 family firms. Our results show that family firms outperform non-family counterparts in terms of return on assets (ROA) and Tobin’s Q when a univariate analysis is invoked. On multivariate analysis, family firms show superior performance to non-family firms with Tobin’s Q. However, family ownership negates firm performance when ROA is taken into account. Regarding the impact of governance elements on Tobin’s Q, institutional shareholding appears to be a significant and positive factor for promoting the performance of both family and non-family firms. Furthermore, board size encourages the performance of non-family firms, while such influence is not observed for family firms. In terms of ROA, foreign ownership inspires the performance of both family and non-family firms. Moreover, government ownership stimulates the performance of family firms, while board independence significantly negates the same. Besides, we find that the performance of family firms run by the founder’s descendants is superior to that of family firms run by the founder. These findings have critical policy implications for family firms in Japan.

Highlights

Our results show that family firms outperform the non-family counterparts on both accounting and market-based measures of firm performance, such as return on assets (ROA) and Tobin’s Q, when univariate analysis is invoked
This happens because family firms do not heavily focus on short-term profitability, which is reflected by ROA (Kapopoulos and Lazaretou 2007), to please third-party shareholders
We investigated how the two mainsprings of corporate governance, namely ownership structure and board structure, influence the firm performance measured by ROA and Tobin’s Q

Summary

Introduction

The performance difference between family and non-family firms has received a new impetus to study because many studies claim that family firms outperform the non-family firms (Anderson and Reeb 2003; Sharma 2004; Allouche et al 2008; Saito 2008; Chu 2011; Hansen and Block 2020; Srivastava and Bhatia 2020), while some others do not document the existence of such a relationship (Filatotchev et al 2005; McConaughy and Phillips 1999; Miller et al 2007; Yoshikawa and Rasheed 2010). Prior studies note that the performance difference between family and non-family firms arises due to the governance system and corporate cultures across countries (Allouche et al 2008; Srivastava and Bhatia 2020). Allouche et al (2008) and Saito (2008) revealed that family firms perform better than non-family firms in Japan. Since most of the studies on family firms in Japan were conducted a fairly long time before, updated evidence on the performance difference between Japanese family and non-family firms is instrumental for policy implications

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