Family-owned Firms Research Articles

Do female directors really add value in Indian firms?

The study examines the effect of female directors on firm performance for Indian firms, where the domination of family firms and a patriarchal society may reduce the importance of female directors. Our empirical results suggest that the gender diversity does not matter for Indian firms. Our further results support this finding by indicating that female directors face more attendance problems compared to male directors, and are less likely to be appointed in monitoring-related committees. Overall, our results strengthen the tokenism status theory associated with female directors, especially in family-owned firms and in a patriarchal society.

Global financial crisis, ownership structure and firm financial performance

PurposeThis paper aims to investigate the financial performance of listed firms on the Australian Securities Exchange (ASX) over two sample periods (1998-2007 and 2008-2010) before and during the global financial crisis periods.Design/methodology/approachThe generalized method of moments (GMM) has been used to examine the relationship between family ownership and a firm’s performance during the financial crisis period, reflecting on the higher risk exposure associated with capital markets.FindingsApplying firm-based measures of financial performance (ROA and ROE), the empirical results show that family firms with ownership concentration performed better than nonfamily firms with dispersed ownership structures. The results also show that ownership concentration has a positive and significant impact on family- and nonfamily-owned firms during the crisis period. In addition, financial leverage had a positive and significant effect on the performance of Australian family-owned firms during both periods. However, if the impact of the crisis by sector is taking into account, the financial leverage only becomes significant for the nonmining family firms during the pre-crisis period. The results also reveal that family businesses are risk-averse business organizations. These findings are consistent with the underlying economic theories.Originality/valueThis paper contributes to the debate whether the ownership structure affects firms’ financial performance such as ROE and ROA during the global financial crisis by investigating family and nonfamily firms listed on the Australian capital market. It also identifies several influential drivers of financial performance in both normal and crisis periods. Given the paucity of studies in the area of family business, the empirical results of this research provide useful information for researchers, practitioners and investors, who are operating in capital markets for family and nonfamily businesses.

Narrating “Made in Italy”

AbstractIn this article, we examine how executives in Italian family-owned firms use their corporations’ histories to associate particular moral discourses of cultural values, responsibility, and authenticity with the “Made in Italy” brand. These links render Made in Italy a national brand – a brand representing all goods produced in Italy and an “authentic” national treasure. Through an analysis of Italian executives’ oral narratives, this article explores how collective identities are constructed in interview settings and how Made in Italy emerges through the various stances that these managers take regarding certain topics. We focus on the ways Italian executives align their corporate narratives, family histories, and brand identities with circulating ideologies on the significance of Made in Italy. By looking at how Italian managers enact Made in Italy as a national brand with collective responsibilities, this article contributes to recent research on narrative discursive practices in the corporate world.

Expert Insights on the Motives and Process of Selling Private Family Firms

This study examines private family firm owners’ motives for selling their firms to external (non-family) buyers. The study contributes to understanding of the sale process in the family business co...

Say no, and then Negotiate: How the Family affects Bargaining Power in Family Firm Buyouts

This paper studies bargaining power in buyout transactions between private equity (PE) firms and current family firm owners who sell their business. We use a hand-collected sub-sample of 86 family ...

Transgenerational Control Intentions and Innovation Spending: A Behavioral Contingency Model

This study presents a behavioral contingency model outlining how the effect of family ownership control on firm-level innovation spending decisions depends on whether or not the family has transgenerational control intentions and how, in turn, this effect of transgenerational control intentions depends on the financial position of the firm. Our model is tested using a sample of 4,938 German enterprises. The empirical results reveal the important role that transgenerational control intentions play in shaping family-owned firms’ innovation spending decisions, and show that the firm’s financial position has a substantial bearing on the nature of this effect. We discuss key academic and practical implications of these findings.

Financial Statements’ Disclosure in the Electronic Federal Gazette And Proprietary Concerns

We develop a framework for discussing regulatory activity in the area of differential disclosure systems. In particular, we define differential disclosure systems as being composed of three elements. The first element consists of the pieces of information that are unregulated and, therefore, subject to a market solution. The second element is made up of those pieces of information that are regulated and, therefore, subject to a compulsory disclosure requirement.Finally, the third element is the criteria that determine which pieces are regulated and unregulated for which firms, respectively. To illustrate the usefulness of our framework we examine the repercussions of the Electronic Federal Gazette that was introduced in Germany in 2007. In particular, we present exploratory empirical findings from an online survey of 126 small and medium-sized entities in Bavaria, a federal state of Germany. The survey participants’ ultimate judgment of the Electronic Federal Gazette turns out to be negative. They perceive it to be affected by the chosen solution in their business environment in various dimensions such as, for example, competition or price negotiations. We demonstrate that it is not size that accounts for their negative evaluation but rather the lack of diversification among those small and family-owned firms. Informed by these results, we discuss what might follow for different regulatory alternatives to assist policy makers in future regulations.

Internationalization of Mexican family firms: the cases of Xignux and Grupo Alfa

PurposeThis theory testing paper compares and analyzes the internationalization process of two Mexican family-owned firms: Xignux and Grupo Alfa. This paper is intended to offer a theoretical understanding using existing frameworks such as OLI (ownership, location and internationalization), LLL (linkage, leverage and learning) and the Uppsala model. Furthermore, it tests whether the theoretical framework of organizational capabilities and international ventures fits the internationalization of these companies.Design/methodology/approachThis paper is based on case study methodology using the companies’ publically available data. Both within-case and cross-case analysis were carried out to identify specific traits in the internationalization pattern of both firms; cases were also compared with literature to identify conflicts and similarities that enable a better understanding of the phenomenon.FindingsIt was found that not a single theory fully and satisfactorily explains the internationalization of both Xignux and Alfa, instead, issues like internationalization into low psychic distance countries, establishment of strategic alliances and the exploitation of locational-specific advantages contributed in the international expansion of the studied companies.Originality/valueThere is an increasing amount of available literature regarding internationalization strategies and internationalization theories applied to developing and emerging country firms. However, most of the studies analyze companies from Asia, and there are limited studies on multilatinas (i.e. Latin American multinationals). Furthermore, scholars in the field of international business are still debating whether the existing theories, or an adaptation of them, explain the internationalization of multilatinas.

'All in the Family': Earnings Management Through Non-Listed Subsidiaries

We find evidence consistent with the hypothesis that Italian non-listed subsidiaries engage in accrual and real earnings management so that their listed parent can avoid reporting annual losses. Thus, the parent firm drives the earnings management of the subsidiaries. We also find that the choice of using subsidiaries to manage earnings is a function of the parent’s ability to manage accruals at its unconsolidated level and that the probability of beating the zero earnings threshold is positively related to the number of subsidiaries the parent owns. Cross-sectional analysis reveals that Big4 auditors mitigate accrual earnings management at the subsidiary level and that family-owned firms are more likely to use earnings management through non-listed subsidiaries to avoid losses. Our evidence is important because it shows how business groups manage earnings differently than single firms.

Organizational Change under Institutional Logics: Family Control of Corporate Boards in Taiwan

We examine how family ownership affects the changing composition of board members in Taiwan. We suggest that the association between family ownership and board composition should be understood in the institutional context in which a firm is situated. We find not only that family-owned firms embedded in the local capital market exhibit greater family presence on the board but also that this effect becomes weaker for those exposed to foreign capital markets. The strong association between family ownership and board control is maintained when the firm is embedded in a local logic of governance but significantly weakens when the firm or its affiliated group is exposed to a global logic of governance. Our research suggests that organizational change in corporate governance practices is contingent upon the institutional logics in which a firm’s governance and control mechanisms are situated.

Performance of Indian IPOs: An Empirical Analysis

The present research study contributes to the extant literature on underpricing rather uniquely by addressing the under-researched linkage of corporate governance to underpricing. The originality of this effort also lies in being one of the initial efforts of exploring governance in context of initial public offering (IPO) underpricing in Indian settings. The study comprises an empirical analysis of 404 Indian IPOs studied for their board structures and ownership attributes using IPO prospectuses. Drawing support from the signalling theory, the variables board size and board committees exhibit a significant positive relationship to the IPO returns on the listing day. In Indian markets characterized by concentrated family-owned firms, promoter ownership does work as an effective signal for investors who take cues of firm potential from ownership patterns. Corporate governance measures have a miniscule contribution in explaining the underpricing of Indian IPOs and indicating that investors do not incorporate these as a major consideration in their investment decision.

The Effect of Intra-Group Loans on the Cash Flow Sensitivity of Cash: Evidence from Chile

We examine the effects of internal capital markets on the propensity of firms to save cash from cash flows (i.e., the cash flow sensitivity of cash). We argue that firms that are net providers of funds to related parties must maintain a higher cash flow sensitivity of cash to prevent high levels of pressure on their cash holdings in contrast to net receivers of intra-holding funds. Based on a panel of listed firms in Chile, we test this premise and examine how a firm’s differences in accounts receivable and accounts payable from related companies affects its cash flow sensitivity of cash. The results confirm that firms with high levels of net loans to related companies have higher cash flow sensitivities of cash and that this relationship is strongest for firms affiliated with business groups and family-owned firms. Furthermore, providers of funds that have the propensity for high savings are those firms that are more financially constrained suggesting that the cash flow sensitivity of cash is an adequate indicator to capture financing constraints.

PAST PERFORMANCE, FAMILY BUSINESS AND CEO SUCCESSION: THE CASE OF INDONESIA

This paper examines the link between firm past performance and the appointment of new CEOs in the Indonesian publicly traded family-owned firms. Further, we also investigate the effect of family member composition in the board of directors and board of commissioners on the CEO succession. This study encompasses 148 succession events gathered from ORBIS database for the period of 2006-2015. Employing a logistic regression, results show that the appointment of new CEOs is generally affected by firm past performance and family member composition in the board of directors. Negative past performance would lead firms to select non-family member. Further, the more the number the family members sitting on the board of directors, the higher the probability family-owned firms to select the new CEO inside family member.

Past performance, family business and CEO succession: the case of Indonesia

This paper examines the link between firm past performance and the appointment of new CEOs in the Indonesian publicly traded family-owned firms. Further, we also investigate the effect of family member composition in the board of directors and board of commissioners on the CEO succession. This study encompasses 148 succession events gathered from ORBIS database for the period of 2006-2015. Employing a logistic regression, results show that the appointment of new CEOs is generally affected by firm past performance and family member composition in the board of directors. Negative past performance would lead firms to select non-family member. Further, the more the number the family members sitting on the board of directors, the higher the probability family-owned firms to select the new CEO inside family member.

Entrepreneurial Experience, Support for Community and Family Firm Performance: A Cross-Study of Product and Service-based

Drawing on theories from corporate social responsibility, entrepreneurship, and human capital, this study examines the structural relationships between entrepreneurial experience, support for community and family firm performance. Partial least-squares structural equation modeling (PLS-SEM) was used to collect the data from 176 family businesses from two sectors of the economy - product-manufacturing and service-based organizations. The empirical results indicated that family firm owners’ entrepreneurial experience (business owner’s education level, length of time as a business owner, and the number of businesses owned in the past) is a significant predictor of the business’ support for community. experience was also found to have a significant and indirect effect on family firm performance. Additionally, the structural model was examined across product and service-based organizations. Our findings suggest that entrepreneurial experience has a stronger effect on family firm performance among service-based organizations. Keywords: Family Experience, Support for Community, PLS-Structural Equation Modeling (PLS-SEM), Multi-Group T-Tests and Permutation Tests To cite this document: Josiane Fahed Sreih, Guy Assaker, and Rob Hallak , Entrepreneurial Experience, Support for Community and Family Firm Performance: A Cross-Study of Product and Service-based Family Businesses, Contemporary Management Research, Vol.12, No.4, pp. 467-496, 2016. Permanent link to this document: http://dx.doi.org/10.7903/cmr.15360

The Role of Managerial Ownership in the Association between Goodwill and Firm Value

This study aims to determine whether managerial ownership of Malaysian firms listed on the main board of Bursa Malaysia moderates the relationship between goodwill disclosure and firm value based on signaling and agency theory. In this quantitative study that uses a deductive approach, the analysis is based on the annual reports of 2,070 firms listed on the Bursa Malaysia website for the years from 2009 through 2011. Multiple regression was applied to analyze the data. The results show a positive and significant relationship between reported goodwill and firm value during these three years. However, when managerial ownership is included as a moderating variable, results show a significant negative association between reported goodwill and firm value. Results should alert Malaysian firms to the importance of understanding investors’ reactions towards a firm’s reported goodwill amounts. A high goodwill amount is not necessarily a good sign about a firm in the presence of high managerial ownership. Elevated levels of managerial ownership may not be seen as positive signs, even for family-owned firms in Malaysia. This is probably because managers are always perceived to be protecting their wealth rather than the firm’s overall wealth.

Family Firm Challenges in Intergenerational Wealth Transfer

Family firm owners accumulate economic and noneconomic wealth that they may wish to transfer to the next generation. Their challenges in doing so include: what, to whom, when, and how to transfer this wealth. The decisions made and actions taken will impact behavior and performance as well as the type and amount of wealth eventually transferred. The articles and commentaries in this special issue address some of these challenges, specifically the what of family firm legacy, the who of willing intra–family successors, and the how of both family and business destabilization and re–stabilization after a major strategic move as illustrated by internationalization.

Family-Owned Firms between Agency Conflicts and Stewardship: Corporate Governance Factors Driving Firm Performance

The performance of family-owned firms has been driven by factors relating to family ownership, family leadership, and external supervision. In this paper, we offer an empirical study investigating the effects of those corporate governance concerns. To serve the purpose, we conducted a survey on 121 Chinese family-owned firms over the period of 2012-2014. Using pooled ordinary least square technique we find that family leadership and external supervision significantly influence the firms' Return on Assets (ROA) and Return on Equity (ROE) whereas family ownership significantly influences ROA, but not ROE. Empirical findings also indicate that firm size, total assets and solidity have significant impact on ROA and ROE. Discussing our empirical findings in light of stewardship and agency theories, we especially supplement stewardship theory due to the close alignment between owners and managers in family-owned firms.Journal of Business and Management Research, vol.1 (2), 2016, pp. 33-47

Las cuatro grandes empresas comercializadoras y los precios internacionales de los alimentos

A large part of the food markets are local or regional; but in situations of production shortages, the international market is what moves the price at the margin and impacts directly on national markets.Four major traders of food grains: Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus, (called the ABCD), control most of the international trade in cereals and grains, and have great influence on determining international prices food. More than a century old, they constitute a most peculiar group of companies. With a low profile, they have changed very little in its long existence. They are among the largest companies worldwide, but are traditionally family-owned firms. In addition to trading, transport and storage activities, they participate in the financing of agricultural production, through the delivery of technology packages and inputs (seeds, fertilizers and agrochemicals); their subsidiaries in numerous countries consume most of the commodities they sell, so their prices are rather transfer prices. They use their own trains and ships to transport the grains; storage is made in their own storage facilities. They are livestock and poultry producers, have great importance in the production of animal feed and biofuel markets; and are owners or lessees of land. They are also financial institutions active in the derivatives markets.

How agency conflict between family managers and family owners affects performance in wholly family-owned firms: A generational perspective

This study analyses the effects of agency conflict between “active family owners” (who participate in firm management) and “passive family owners” (who do not do so) on the performance in unlisted Spanish family firms wholly owned by family members. We employ agency theory to argue that ownership concentration by active family owners and governance mechanisms (direct control by passive family owners, existence of board of directors, and family governance mechanisms) improve the firm performance and that this effect intensifies in later-generation firms. Our findings show that family managers’ ownership and family governance mechanisms have a positive influence on the performance in second- and later-generation firms. The results also show a positive effect of direct control by passive family owners over active family owners in second- and later-generation firms. However, the existence of a board of directors is not related to family firms’ performance.