Family Firm Status Research Articles

Drivers of effort: Evidence from employee absenteeism

We use detailed information on individual absent spells of all employees in 4140 firms in Denmark to show large differences in average absenteeism across firms. Using employees who switch firms, we decompose days absent into an individual component (e.g., motivation, work ethic) and a firm component (e.g., incentives, corporate culture). We find the firm component explains 50%–60% of the difference in absenteeism across firms, with the individual component explaining the rest. We present suggestive evidence of the mechanisms behind the firm effect with family firm status and concentrated ownership strongly correlated with decreases in absenteeism. We also analyze the firm characteristics that correlate with the individual effect and find that firms with stronger career incentives attract lower-absenteeism employees.

Family Firm Brands, Perceptions of Doing Good, and Consumer Happiness

This research examines how and why family firm brands (compared to nonfamily firm brands) affect consumers. We argue that a brand’s family firm status acts as a signal to consumers who share category-based beliefs about family firms doing good due to preserving their socioemotional wealth. This perception in turn is a fair and positive appraisal in the mind of consumers (in the sense of indirectly benefiting others with their spent financial resources) that elicits happiness. In an experimental study, we show that family firms are being perceived by consumers as acting more supportive towards internal and external stakeholders and that these perceptions in turn result in higher consumer happiness. In other words, our results indicate that communicating a brand’s family firm status might have a positive indirect influence on consumer happiness through the perception of doing good. On the other hand, our results suspect that a brand's family firm status might also trigger beliefs (not part of our study) with more negative indirect effects on consumer happiness.

Family Influence and R&D Spending in Dutch Manufacturing SMEs: The Role of Identity and Socioemotional Decision Considerations

Prior research has revealed a negative association between family influence and R&D spending. The dominant explanation for this association centers on the role of socioemotional considerations in decision‐making. These socioemotional decision considerations are argued to play a more prominent role among family firms and to lower their R&D spending intensity. However, to date, this negative explanatory mechanism has not been empirically verified. Moreover, a deeper analysis of the literature suggests that some family‐induced socioemotional considerations may actually stimulate R&D investments. In this study, four socioemotional decision considerations are delineated—namely, concern for current control, for extended preservation, for organizational reputation, and for organizational values and traditions—of which the first two are anchored in a family's nurturer role identity and the latter two in a family's organizational identification. It is hypothesized that those socioemotional considerations derived from a family's nurturer role identity constrain R&D spending, while those derived from the family's organizational identification boost R&D spending. The empirical study concentrates on the setting of privately held manufacturing SMEs, and using survey data on 365 such companies in the Netherlands, a structural equation model is estimated. The analyses reveal several interesting results: (1) the overall association between family firm status and R&D spending indeed turns out to be negative, and this negative effect is fully explained by family firms' preoccupation with extended preservation; (2) concerns for organizational reputation and for organizational values and traditions partly compensate the negative effect of the extended preservation mechanism. Key academic and practical implications of these findings are discussed.

Do women perform better in family firms?

PurposeEmpirical evidence on the relation between female involvement at the head of a company and firm performance remains inconclusive. This study aims to disentangle the existing evidence by exploring the moderating role of family firm status.Design/methodology/approachThe study analyzes the moderating role of family firm status on the relation between gender diversity and firm performance among a sample of 88 Italian wine firms from Campania region during the 2007-2014 period. This work uses random effects panel data regression and tests the robustness of the results using alternative econometric techniques. Performance is measured in terms of profitability.FindingsThe findings reveal that women in top positions do not affect firm performance. However, it is found that this relation is significantly moderated by family firm status. Specifically, compared to high family-controlled firms, female involvement negatively impacts firm performance in low family-controlled firms.Research limitations/implicationsFrom a theoretical standpoint, the results enable a more nuanced interpretation of the relationship between female involvement and firm performance. From a managerial perspective, the results highlight conditions that may promote the role of women in business.Originality/valueThis paper provides insights into the relation between gender diversity and firm performance by exploring the moderating role of family firm status – a novel approach in the management and wine business literature.

Drivers of Effort: Evidence from Employee Absenteeism

We use detailed information on individual absent spells of all employees in 4,140 firms in Denmark to document large differences across firms in average absenteeism. Using employees who switch firms, we decompose days absent into an individual component (e.g., motivation, work ethic) and a firm component (e.g., incentives, corporate culture). We find the firm component explains a large fraction of the difference in absenteeism across firms. We present suggestive evidence of the mechanisms behind the firm effect. After controlling for selection of employees into firms, family firm status and concentrated ownership are strongly correlated with decreases in absenteeism. Taken together, the evidence supports the importance of firm-level mechanisms in eliciting effort from existing employees.

Dual entrenchment and tax management: Classified boards and family firms

This study examines whether and how multiple managerial entrenchment devices within a firm, specifically the structure of the board of directors and family firm status, interact to influence tax management. Using a sample of 4,000 U.S. public firm-year observations covering the period 1999–2013, we find that the classified board structure and family firm status are both negatively related with tax avoidance. However, accounting for the interaction between board structure and family firm status, we also find that the negative associations between both entrenchment measures and tax management apply only where the other entrenchment mechanism is absent. In further analysis, we find that higher levels of monitoring by institutional investors neutralize the interaction between the presence of a classified board and family firm status. Our evidence highlights that governance/monitoring mechanisms can interact in complex ways, including an offsetting effect between potentially redundant dual-level entrenchment mechanisms, to influence tax management behavior.

Does family involvement foster IPO value? Empirical analysis on Italian stock market

Purpose – The purpose of this paper is to shed light on the relationship between family involvement and Initial Public Offering (IPO) value in the Italian context. Design/methodology/approach – Based on a unique hand-collected data set, the authors test the hypotheses on companies that went public between 2000 and 2011, making inference on 113 firms using OLS hierarchical regressions. The authors quantify the IPO value from an outside investors’ perspective with two measures to proxy for IPO value in the short-term and apply robustness checks for long-run performance. In a stewardship framework, the authors examine demographic variables including family firm status, family involvement in managerial positions and family generations. Findings – The results suggest that family firm status positively influences IPO value, that greater family involvement corresponds to higher IPO value and lastly, that the beneficial effect of family control is mainly attributable to the first generation. The results are robust to alternative specifications of each phenomenon. Research limitations/implications – As a single-country study, the results refer exclusively to the Italian context and thus the evidence provided may not automatically be generalized to IPOs of comparable equity markets. Originality/value – This study expands current knowledge by showing how investors “price” family ownership in an IPO; furthermore the authors assess how certain characteristics of family firms affect the IPOs (e.g. family involvement and intergenerational).

Rate of substitution between economic and socioemotional wealth in family firm IPO underpricing

This study investigates differences in IPO underpricing between family and nonfamily firms. Using a sample of 1,743 IPOs occurring in seven European countries from 1995 to 2011, we show that the relationship between family firm status and IPO underpricing is contingent on the degree of share retention.

Being Perceived as a Family Firm and New Product Acceptance: An Empirical Analysis

Contributing to the discussion about the effects of family firm image/family firm reputation this paper presents some insights on consumers’ perception of family firm status, how and why this perception influences consumer decisions and its consequences. Following a marketing conceptualization we analyzed how the perception of a company as family firm has an influence on new product acceptance (NPA) which is crucial for the company’s long-term survival. We adopt a multi-method three-study-design using a total of 293 respondents. Our first study using an experimental research design empirically supports a positive influence from the consumers’ perception of a company as being family firm on the NPA and shows that this effect is due to the increased trustworthiness of family firm perception. By using three qualitative focus groups, the second study further explores the underlying mechanisms and identifies the importance of the constructs personification, trustworthiness, and the moderating role of consumers...

Is Warren Buffett's Commentary on Accounting, Governance, and Investing Practices Reflected in the Investment Decisions and Subsequent Influence of Berkshire Hathaway?

ABSTRACT We examine (1) whether the accounting, governance, and investing practices of Berkshire Hathaway investees are consistent with Warren Buffett's public statements on what constitutes good accounting, governance, and investing practices and (2) whether these practices are associated with Berkshire's initial “selection” or Buffett's subsequent “influence.” Compared to control firms, we find that Berkshire investees are highly likely to follow Buffett's investment philosophy, somewhat likely to follow his preferred accounting, disclosure, and compensation policies, but unlikely to follow the board-related governance practices that we can measure. Second, we find some evidence that the business practices of future Berkshire investees are more aligned with Buffett's beliefs in the pre-investment period compared to control firms. Third, we find relatively modest evidence that investees improve a few of their business practices subsequent to Berkshire's initial investment. However, and overall, Buffett does not appear to be especially influential in the subsequent accounting, governance, and investing decisions of Berkshire investees, likely because he has already taken into account the attributes he cares most about in the initial investment decision. Data Availability: Except for the Gunning Fog Index and family firm status, other data in this study are available from commercial providers, e.g., CDA/Spectrum Institutional Money Manager Holdings, Compustat, CRSP.

Ties that Bind? A Mediation Analysis Exploring Contract Use in Family versus Nonfamily Firms

Based on the assumptions of agency theory, family business researchers have often argued that family firms are less likely to use formal methods of monitoring and control than nonfamily firms. We explore the relationship between family firm status and presence of a written agreement among the owners, a formal measure of control. We hypothesize economic goals and perceived level of risk taking and management efficacy will mediate the relationship between family firm status and presence of a written agreement. Results indicate that the primary goal of the firm serves as a partial mediator of this relationship.

All in the family? Social performance and corporate governance in the family firm

We analyze the social performance of a sample of publicly traded family and non-family firms. Using the KLD index of social performance, we find a negative relationship between family firm status and poor social performance. However, we find no evidence that corporate governance is related to firm social performance. Findings also provide evidence that corporate governance moderates the relationship between extent of family control and social performance.

The Effects of Family Versus Career Role Salience on the Performance of Family and Nonfamily Firms

This study investigated how the relative salience of business owners' family and career roles might influence performance outcomes in family versus nonfamily firms. Using data from 156 family and nonfamily firms, the data show that family firm status moderates the relationships such that the career role salience of a business owner is positively and more strongly associated with performance outcomes in family firms than in nonfamily firms. Conversely, the data show that family firm status negatively moderates the relationship between the business owner's family role salience and expansion activities. Implications for theory and practice, as well as future research directions, are discussed.

Understanding the Complexities of Private Family Firms: An Empirical Investigation

This study extends prior research concerning the perceptions of managers regarding the most important issues facing their firms. Contrary to the evidence gathered on publicly traded companies that shows that ownership issues are deemed most important to financial managers, the most important issues facing private family firms are more short-term in nature. Estate and succession planning become somewhat more important once operational and financial issues are addressed. The results found in this study are robust when firm size, age, survey respondent, and family-firm status are analyzed. Support for commonly accepted family business statistics is found.