Behavior Of Family Firms Research Articles

Linking CEO Celebrity to the Ethical Behavior of Family Firms in a Digital Age: Evidence from China

Abstract Given the widespread use of social media, growing interest has been paid to the nexus of corporate ethics and the celebrity status of chief executive officers (CEOs). This is of even more paramount importance in family-owned firms that are very sensitive to public image and its ethical relevance. However, no empirical evidence has been found. In response, the purpose of this paper is to examine the mechanisms through which family business ethics and CEO celebrity are associated, as well as the moderating influence of a leader's personal traits on these relationships. According to secondary data from listed Chinese family firms, from 2013 to 2020, the celebrity status of CEOs was strongly connected with the ethical behavior of organizations; however, this link was mitigated by the heterogeneity of CEOs. The firm's ethical behavior and the CEO's celebrity are positively correlated when the CEO is a family member; when the CEO is not a family member, the correlation is inversely U-shaped. Furthermore, the age, dualities (including the chairman role), and tenure of CEOs had a major impact on the mechanisms of CEO fame and family business ethics. The theoretical and practical implications of the study are discussed in detail.

Nonfamily executives in family firms and dividend payout: evidence from Pakistan

Purpose The strategic behavior of family firms is not the same when the top management positions are occupied by nonfamily executives. This study aims to examine the dividend payout behavior of family firms in the presence of nonfamily chairperson and nonfamily chief executive officer (CEO). Design/methodology/approach The authors used 2,926 firm-year observations of nonfinancial firms listed on Pakistan Stock Exchange over the period 2012–2021. To test the hypotheses, the authors used a generalized method of moments estimation and further applied ordinary least squares regression and fixed effects analysis to check for the robustness of results. Findings Using the lens of social identity theory, the authors found that for the sake of a firm’s reputation and to increase the wealth of family, the family firms are associated with higher dividend payout. However, the presence of nonfamily chairperson and nonfamily CEO weakens this positive relationship due to higher information asymmetry leading to lower dividend payout in such firms. Originality/value The study adds to the family business literature by highlighting the dividend payout behavior of family firms and providing empirical evidence of distinct behavior of family firms in presence of nonfamily chairperson and nonfamily CEO in context of an emerging economy.

Succession and real earnings management in family businesses: is socioemotional wealth a predictor for Cooking the Books?

PurposeEarnings management is a practice that is detrimental to future business viability. For family businesses, viability in the form of succession, continues to be difficult. The motivation to use earnings management is different in family businesses as they have unique pressures and characteristics. The purpose of this paper is to identify if the level of socioemotional wealth in a family business impacts real earnings management behavior during succession. The goal is to better understand what impacts the use of real earnings management for family businesses so that it can be curtailed, enhancing future business viability and successful generational transfer.Design/methodology/approachA sample of 200 small and medium size business owners participated in an experiment. Binary logistic regression was used to identify any relationship between SEW, succession and REM.FindingsThis study finds that socioemotional wealth and succession impact real earnings management behavior in family firms. When succession is not present, the study finds that companies with high socioemotional wealth are less likely to engage in real earnings management than low socioemotional wealth companies. However, when succession is present, the engagement in REM for companies with low socioemotional wealth drops significantly while the behavior of those with high socioemotional does not materially change.Practical implicationsUnderstanding how to position a family business for succession realization is important. We do not know exactly what factors impact the failure rate but identifying how facets of the businesses (SEW and succession) might impact REM and ultimately financial performance will be important to small and medium-sized family business owners in the US as they begin their succession journey.Originality/valueThe study’s experimental design using participants in a US family business, offers an opportunity to better understand this critical portion of the economy and the variables that potentially impact real earnings management decisions. It contributes to the literature by offering potential reasons behind the conflicting findings on REM in family businesses and the impact of SEW on earnings management. It offers a unique view of behavior within different family businesses as opposed to a comparison often found in the literature between family and non-family firms. It also contributes to a gap in literature for US small to medium family businesses.

Family successor CEO and innovation investment: a study based on the theoretical upper echelons and conflict theory

PurposeGrounded in upper echelons theory (UET) and conflict theory, the purpose of this study is to analyzes the innovative behavior of family firms from the perspective of the cognitive differences between successors and senior managers.Design/methodology/approachThis research employed a sample listed family firms in China. The obtained results were subjected to hierarchical regression analysis, complemented by rigorous model robustness testing through propensity score matching and regression with substitution variables.FindingsSuccessors engender task conflicts with family members in the top management team (TMT) due to cognitive differences, thereby stimulating corporate innovation. Conversely, successors engender relationship conflicts with non-family members in the TMT, impeding innovation. Furthermore, the performance expectations and the gender of the successor CEO also influence the relationship between cognitive differences and innovation between the successor and the TMT.Originality/valueThis study's originality and value lie in its innovative application of UET and conflict perspectives to dissect the intricate layers of intergenerational cognitive differences and their impact on the innovative behavior of family firms. It augments our comprehension of how the internal dynamics within family firms shape strategic innovation decisions.

All Is Well Until It Isn’t: Socioemotional Wealth Congruence and Employee Behavior in Family Firms

This article explores the counterintuitive notion that congruence in the importance family firm supervisors and their employees place on socioemotional wealth is negatively associated with employee citizenship and proactive behaviors, while incongruence has positive effects. Results from polynomial regression analysis of data collected from 159 family firm supervisor–employee dyads support our complacency theory-based model, suggesting that congruence creates attentional lethargy and complacency toward organizational citizenship and proactivity while incongruence makes the need to engage in beneficial behaviors more salient. The negative effects of congruence are alleviated by higher levels of leader–member exchange. Theoretical and practical implications are discussed.

The impact of the CEO’s Islamic religiosity on tax aggressive behavior in family firms

Purpose The authors investigate the influence of CEOs’ Islamic religiosity on the level of tax aggressiveness within private family firms. In addition, this study aims to explore the moderating role of the CEO's ownership stake in the firm and the payment of Zakat. Design/methodology/approach The authors gathered data through surveys completed by 199 CEOs of Jordanian Islamic family firms. These survey results, along with financial statements, were used for multiple ordinary least squares regression analyses. Findings The results of this study reveal a negative relation between the extent of Islamic religiosity of the CEO and the level of tax aggressive behavior. Furthermore, the results suggest that an increase in the CEO’s ownership stake strengthens the negative association between the CEO’s religiosity and the extent of tax aggressive behavior. Finally, the CEO’s involvement in Zakat payments is shown to mitigate the negative association between the CEO’s religiosity and the extent of tax aggressive behavior. Originality/value In contrast to prior research that examines the relationship between religiosity and tax aggressiveness within the context of other religions, particularly Christianity, in listed firms, and primarily considers the religiosity of the overall firm environment, the study centers on the CEO’s religiosity in private Islamic family firms. The Islamic context further enables us to investigate whether the fulfillment of Zakat diminishes the moral obligation experienced by religious CEOs to fulfill their tax responsibilities.

Organizational homophily of family firms: The case of family corporate venture capital

ABSTRACT Through the lens of organizational homophily, our study analyzes the network behavior of family firms in the high-risk context of family corporate venture capital (CVC). Specifically, we examine family corporate venture capitalists’ patterns in syndicate partner relationships using a global sample of 3,130 coinvestments from 2007 to 2022. We find that family corporate venture capitalists are more likely than their nonfamily counterparts to coinvest with syndicate partners who possess a similar wealth of experience in terms of overall investment experience, industry experience, and specialization. Family corporate venture capitalists follow the expected homophilic behavior of family firms when selecting nonfamily partners. This phenomenon is less pronounced in larger syndicates wherein individual syndicate partners may have less influence and there may be looser bonds between coinvestors. Our study contributes to research on family firms’ venturing and social capital as well as on CVC syndication.

Investigating the Role of Non-family CEOs in Knowledge Diffusion and Investment Behavior in Family Firms During Succession

Investigating the Role of Non-family CEOs in Knowledge Diffusion and Investment Behavior in Family Firms During Succession

Intergenerational Transmission and Rental Occupancy Behavior in Family Firms

As more and more family firms enter the stage of intergenerational inheritance, the impact of second-generation family successors on business operations at the early stage of succession has attracted widespread attention and heated debate. Based on this, this paper analyzes and examines the changes in corporate rental occupancy behavior from the perspective of intergenerational succession events of family firms by taking Chinese family-held listed companies as the research object from 2010 to 2022. The results find that the rent-taking behavior of family firms is significantly suppressed after the second-generation successors take office. Through the analysis of the influence mechanism, it is found that the influence of intergenerational succession of family firms on the level of rent occupancy has an incentive effect in the way of exacerbating financing constraints and a disincentive effect in the way of lowering the level of risk-taking, with the disincentive effect being dominant. Further, the inhibitory effect of intergenerational inheritance on firms' rent-taking behavior is weakened when there is intense competition in the industry, a high percentage of the chairman's shareholding, and a low level of educational attainment of the successor. The research work in this paper not only enriches the relevant literature, but also the relevant findings have important implications for the monitoring and control of irregularities in family firms.

Analysis of tax compliance behavior of family businesses: combining social and psychology norms and legitimacy determinants

PurposeThis study aims to analyze the tax compliance behavior of family firms by integrating social and psychological norms with legitimacy determinants, focusing specifically on the Moroccan context.Design/methodology/approachEmploying a qualitative research design, the study conducted semi-structured interviews with 30 chief executive officers (CEOs) of Moroccan family firms. The data were analyzed using thematic analysis to unravel the interplay between individual beliefs and societal norms.FindingsThe findings reveal a complex interplay between the personal norms of CEOs and chief financial officers (CFOs) and wider societal and cultural expectations, significantly influencing tax compliance behavior. The study identifies the multifaceted nature of tax compliance, which is shaped by personal ethics, family values and the dominant societal tax culture.Research limitations/implicationsThe research is limited by its qualitative approach and focus on Moroccan family businesses, which may not be generalizable to other contexts. Future studies could use a quantitative approach and expand to other geographical settings for a more comprehensive understanding.Practical implicationsInsights from the study can assist policymakers and tax authorities in developing culturally sensitive tax compliance strategies that resonate with family business values.Social implicationsThe research underscores the importance of considering sociocultural dimensions in tax compliance, fostering a more cooperative relationship between family businesses and tax authorities.Originality/valueThe study contributes a novel perspective by synthesizing social, psychological and legitimacy factors in understanding tax compliance in the unique context of family businesses.

One more piece of the family firm debt puzzle: the influence of socioemotional wealth dimensions

The literature on debt financing in family firms is still inconclusive. Initial studies have usually focused on the influence of family involvement on firm’s debt levels by using the explanations of traditional economic theories. More recent studies have begun to focus on the role of family goals in family firm debt levels, particularly drawing on socioemotional wealth (SEW), which has helped in the development of financial theories of family business. Nevertheless, existing arguments have usually not considered SEW as a multidimensional construct that covers diverse family goals. In addition, literature has usually drawn on arguments considering SEW as a stock, but have not considered the importance given to SEW (SEWi), which specifically acknowledges SEW as a goal. Our paper responds to recent calls to extend theoretical arguments on the effect of diverse dimensions of SEWi on family firm behavior and to focus on the role of SEWi on the family firms’ debt. Specifically, we test how the CEOs’ assessment of the importance that their family attaches to the continuity, prominence, and enrichment dimensions of SEWi influences the level of debt. To do so, we use a sample of 126 Spanish unlisted family businesses. Our results show that the continuity dimension of SEWi leads family businesses to increase their debt level being a key determinant of this financing decision.

Unique types and innovation input of family firm CEOs: moderating role of managerial ability in Chinese listed firms

In family firms the role of CEO is highly significant with reference to devise strategic decisions and deciding if it is feasible to invest in innovation input. This study aims to investigate the behaviour analyses of the diverse types of CEOs in family firms towards innovations. This study also analyzes the moderating role of managerial ability in the nexus of CEO types and innovation input. The data are obtained from Chinese A-share listed family firms from Accounting Research and China Stock Exchange in 2012–2020 and analysed using ordinary least squares regression. Tobit and probit regressions are also employed to confirm the results. Results indicate that non-family and family CEOs (with no controlling rights) show identical behaviour concerning their lower intentions to promote innovations in R&D projects than family CEOs with actual controlling rights. In addition, family CEOs with actual controlling rights exert a positive effect on R&D, indicating that they are more willing to invest in innovative projects. Moreover, we observe the significant moderating role of managerial ability in the nexus of CEO types and innovation activities. We find that high managerial ability alters the behaviour of different CEOs. With the moderation of managerial ability, non-family and family CEOs (without actual controlling rights) also show willingness to invest in innovative projects and without managerial ability, CEOs’ willingness to make innovations decline. This study is a pioneer work that investigates the impact of diverse types of CEOs to unlock notable insights regarding the R&D investment behaviour of Chinese family firms with moderating role of managerial ability. This study is useful to all parties involved with the company, including employees, clients, suppliers and customers. The results of this study can also assist board members in selecting and recruiting non-family CEOs or keeping family CEOs (with or without actual controlling rights).

Explorers, Audacious, Hesitant, and Hermetics: N-Helix Dynamics and Collaboration Behavior in Latin America Family Firms

This research aims to explore the collaborative behavior of family firms based on their partners, the objective of cooperation, their market position, and the intensity of competition. This research used a N-Helix approach and implemented a multiple correspondence analysis in a sample of 127 Chilean family businesses of different ages, sizes, and industries. According to their collaboration behaviors, the data analysis proposes that family firms may be grouped into four clusters: explorers, audacious, hesitant, and hermetics. These clusters are defined principally by the number of collaborators and the goals of the collaboration. Additionally, Triple Helix and dyadic collaborative partnerships have been identified when exploring the cooperative behavior of family firms. These research findings have implications for understanding the dynamics of family firms' collaboration and analyzing the critical strategical issues found in family firms' collaborative behavior.

Seeing Eye to Eye? Socioemotional Wealth Congruence and Prosocial Behavior in Family Firms

Seeing Eye to Eye? Socioemotional Wealth Congruence and Prosocial Behavior in Family Firms

Socioemotional wealth of family firms during the COVID-19 pandemic: the role of slack resources

PurposeThis study investigates the behaviour of family firms, family management and family ownership regarding their socioemotional wealth (Corporate Social Responsibility (CSR)) during the COVID-19 pandemic and according to their slack resources availability.Design/methodology/approachThis study employs a multiple regression analysis to analyse 245 firm-year observations from 2020 to 2021.FindingsFamily firms have a negative effect on CSR, as do family management and family ownership. Slack resources (both absorbed and unabsorbed) reduce the negative effect of family firms (and family ownership) on CSR. Unabsorbed slack resources reduce the negative effect of family management on CSR and absorbed slack resources increase the negative effect of family management on CSR. The results are robust with various measurements of slack resources. Extra analyses reveal that family commissioner has no effect on CSR.Originality/valueTo the best of the author’s knowledge, this is the first empirical study to analyse the impact of COVID-19 on the preservation of socioemotional wealth in family firms. This study proves the theoretical argument of prior studies that the preservation of socioemotional wealth in family firms during the COVID-19 pandemic depends on their financial condition. The study also proves that there are different attitudes among family ownership, family management and family firms concerning the use of slack resources for socioemotional wealth preservation that have not been analysed by previous research.

Acquisition Relatedness in Family Firms: Do the Environment and the Institutional Context Matter?

AbstractResearch on the acquisition behaviour of family firms has produced conflicting theoretical arguments and mixed empirical findings on their propensity to acquire related or unrelated targets. While previous work has mainly focused on firm‐level variables, this study examines the environment in which family firms operate and the institutional context where acquisitions take place. Drawing on the mixed gambles logic of the behavioural agency model, we theorize that family firms are more likely than nonfamily firms to undertake related acquisitions when they operate in uncertain environments to avoid losses to the family's current socioemotional wealth. However, family firms are more likely to undertake unrelated acquisitions, when the environment is uncertain but the target operates in a similar and more developed institutional context where prospective financial gains are more predictable. Overall, building on a sample of 1014 international acquisitions, our study offers important contributions to the literature on family firms and acquisitions.

Effect of environmental dynamism on entrepreneurial orientation in family firms: the moderating role of informal institutions

PurposeThe aim of this paper is to investigate the effects of environmental dynamism on different EO dimensions in family firms. The authors also examine the moderating role of national culture (uncertainty avoidance and in-group collectivism) and the level of family control and influence in fostering/hindering this relationship.Design/methodology/approachA survey was conducted among 1,143 family firms from twenty-eight countries. The authors developed and tested hypotheses through a fixed-effects regression analysis.FindingsThe findings suggest that environmental dynamism has a positive effect on all three EO dimensions. Analysis reveals a positive moderating role of family control and influence and negative moderating roles of in-group collectivism and uncertainty avoidance.Practical implicationsThe findings imply that family firm managers should carefully interpret the influence of their national culture on family firm behavior. More specifically, family firms in dynamic environments should consider the importance of the national culture in which they are embedded. Those operating in high uncertainty avoidant and highly collectivist cultures should take proactive steps to cultivate a corporate entrepreneurial culture. On the other hand, the family should not undermine the effect of its control and influence. In dynamic environments, family control and influence may be a competitive advantage in reinforcing entrepreneurial orientation.Originality/valueThe study contributes to the literature on EO in family firms by expanding the previous research on the antecedents of EO and examining moderation effects of culture and family control and influence across a broad multi-country sample. In contrast with the common findings regarding the effect of family logic on EO, the study shows the strengthening role of family control and influence in the relationship between environmental dynamism and EO. The authors show that culture as an informal institution may also play a critical role in hindering/strengthening the relationship between environmental dynamism and EO.

The zero-leverage policy and family firms

PurposeThe purpose of the study is to examine the zero-leverage (ZL) phenomenon in family and non-family firms.Design/methodology/approachThe authors consider three hypotheses and empirically test them using a sample of the largest US firms over the 2001–2016 period.FindingsThe authors find that, on average, 19.20% of family firms have zero debt vs 10.42% for non-family firms. The authors also find that family firms strategically choose to be ZL to maintain financial flexibility for future investments and exercise control over the decision-making process, consistent with the hypotheses of financial flexibility and control considerations. However, non-family firms are more likely to have zero debt if they have financial constraints and the credit market does not lend them money at affordable credit rates, consistent with the financial constraint hypothesis.Originality/valueThis paper contributes to different strands of literature. First, the authors contribute to the literature examining family firms' financial decisions. Second, the authors complement previous studies by exploring the reasons for the ZL behavior of family firms compared to non-family firms. The authors also examine the previously unexplored impact of ownership concentration on the ZL question.

The Theoretical Lineage and Evolutionary Logic of Research on the Environmental Behavior of Family Firms: A Literature Review.

Family firms research is becoming one of the most important and promising areas for theoretical innovation in management practice. Corporate environmental behavior has attracted widespread academic attention, but the research on the environmental behavior of family firms is obviously insufficient, and the relevant research results are still in a fragmented state. In this paper, we review and summarize the existing research on the environmental behavior of family firms from three aspects: the research dimensions, the influencing factors, and the influencing effects, and try to sort out the theoretical lineage and evolutionary logic of the environmental behavior of family firms. From the existing research results, the research on the influencing factors and effects of family firms' environmental behavior is at the stage of strife, and there is a lack of in-depth and systematic research on the mechanisms affecting the environmental behavior of family firms and the changes of their effects. In the future, we can explore how to apply or integrate multiple theories simultaneously for complementary explanations, so as to provide a reference for the government to formulate targeted policies to stimulate and regulate the environmental behaviors of family firms.

Achieving Governance Disclosure – the Surprising Case of an Emerging Market Family Business

Since 1961, when the first paper to clearly recognize and study family firms was published, the business literature has seen an increasing trend in the number of articles relating to family firms. One reason why interest in this field has grown may be because family-owned firms do not behave as expected by the predominant theoretical framework. Family-ownership has been shown to be unique in its effect on the firm when compared to other firm ownership structures. Such divergent behavior is disconcerting, knowing that, globally, family firms may be the most common firm structure. Governance is one of the largest streams of research within the family business literature. Regrettably, most research on family businesses is focused on Western developed economies suggesting that theory building when it comes to family business governance has been largely driven by the Anglo-Saxon corporate governance model. This is unfortunate because we know that context plays a vital role in governance outcomes and in family firm behavior. One of the important challenges faced by developing countries is governance disclosure, with potentially grave repercussions for their economic futures. The aim of this research is to help understand the motivations behind the decision of a family, non-listed firm, in a developing country context, to disclose governance information on its board members. We propose a larger role for institutional isomorphism at the intersection of the family, governance, disclosure, and developing country literatures. To this end, we identified a family business in the emerging market of Lebanon that has demonstrated this phenomenon. Despite the odds, this firm was able to overcome multiple challenges - family firm structure, secretive culture, no legal requirements, information sensitivity - to ultimately share this information with the public. Our case study helps us suggest a context-specific governance disclosure model based on the institutional theoretical framework.