Abstract
This paper examines the effects of family control on a firm’s adoption of sustainability practices, with special attention given to the heterogeneity of the family business derived from the generational stage of the company. Using a panel of 166 Australian companies listed between 2011 and 2018, we found that family businesses have lower sustainability scores compared to non-family businesses, according to the predictions of the socioemotional wealth (SEW) approach. For a subsample of family businesses, we found that multi-generational family businesses score better on sustainability than firms managed by the founders (first-generation). The SEW perspective could explain the effects of family control based on the pursuit of non-economic goals and the higher risk-aversion of family businesses. The decline in non-economic goals resulting from the ageing of the company stimulates the adoption of better sustainability practices. The generational stage of a family business could be a moderator of the relationship between family control and the adoption of sustainability practices and is a central element in explaining the disparity in the sustainability policies within family businesses.
Highlights
IntroductionThe World EconomicForum (WEF) has defined the guidelines of “stakeholder capitalism” as an economic system where companies respond to their shareholders as well as to society in general
Our results indicate that family firms are reticent to the adoption of sustainability practices, but this reluctance remits with the evolution of the generations in control
The following regression equation was used to test our hypotheses on the effect of family control and firms’ generational stage on the firms’ sustainability practices: SUSTAI Ni,t = α j + β 1 ( family-controlled and zero otherwise (FAMILY) | MULTI − GEN ) i,t +
Summary
The WEF has defined the guidelines of “stakeholder capitalism” as an economic system where companies respond to their shareholders as well as to society in general. Under this new paradigm, companies suffer the pressure of increasing public scrutiny and face the growing complexity derived from the diverse and often conflicting demands of the stakeholders. Sustainability indicators allow companies to identify and assess the benefits of being sustainable They facilitate communication of their sustainability achievements to investors and to the financial markets. Investors are placing growing importance on the integration of ESG criteria in the investment process
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