Do Family Firms Pollute Less? – Was an Incomplete Question

Abstract

While prior research suggests that family firms pollute less, the key explanation we have is the socioemotional wealth perspective, which suggests that family firms are more careful with their toxic emissions due to subjectively higher reputational costs that may follow a harm discovery. At the same time, it is relevant to note that not all types of environmental performance are regulated or even monitored to turn on the loss aversion rationale. An example is the energy efficiency context where a common socioemotional wisdom would not give any preference to family-owned firms. Nevertheless, studying the electricity consumption of 1,683 Canadian firms over a 5-year period between 2012 and 2016, we find that family-managed firms still consume less energy to attain the same level of sales (holding industry and other resource consumption factors constant). This questions whether the reputational concerns of the owners is a key reason to a lower pollution in family firms and also rejects a common assumption that doing so has an efficiency cost. We provide an alternative rationale.