Abstract
Using a unique database of 87 Tunisian non-financial firms over the period 1998–2014, we analyse risk-taking behaviour of family firms. We find evidence that family ownership is positively related to corporate risk-taking. But family firms undertake less risky projects when the manager is not a member of the family or when the founder is no longer active in the firm. Our results show also that in these cases, family ownership becomes negatively associated to risk-taking. Finally, we find that family firms take more risk only when they belong to diversified groups, especially those operating in several industries.
Highlights
Business plays an important role in the economy, especially in emerging markets where this type of firms is prevalent
Most empirical studies examining this feature predict that risk-taking in family firms is higher when the founder is still active in the firm
Most empirical studies examining the relationship between the presence of founding family and firm performance conclude that family ownership creates value only when the founder is still active in the firm, either as a CEO or a chairman with a hired CEO (Villalonga and Amit, 2006; Muttakin et al, 2014)
Summary
Business plays an important role in the economy, especially in emerging markets where this type of firms is prevalent. Another set of papers content that family-firms are more long term oriented and invest more in risky projects such as R&D and innovative investments They are assumed to undergo lower agency conflicts between managers and shareholders (Zahra, 2005; Nguyen, 2011; Schmid et al, 2014). In this paper, we examine whether risk-taking behaviour of Tunisian family firms may be affected by their affiliation to a group and by the degree of the diversification inside their groups Another stream of research focuses on the effect of governance characteristics in family firms such as family management and the active role of the founder. We contribute to the literature on corporate governance characteristics of family firms by documenting how risk-taking behaviour may change when the founder is no longer active in the firm or the manager is not a member of the family.
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