Financial Performance Of Family Firms Research Articles

Entrepreneurial orientation and socioemotional wealth as enablers of the impact of digital transformation in family firms

PurposeThe research aims to investigate how digital transformation (DT), entrepreneurial orientation (EO) and socioemotional wealth (SEW) impact the financial performance of family firms in uncertain business environments. Drawing from existing literature, we propose that DT and EO drive firm performance. Additionally, we suggest a new role for SEW, which positively moderates this relationship in family firms, especially in terms of risk behavior and innovation for survival.Design/methodology/approachWe used the STEP Consortium’s 2020–2021 database, derived from a global survey that explored how family businesses responded to environmental shocks. Following STEP’s definitions, we proposed three hypotheses and tested two models using structural equation modeling.FindingsThe findings show that EO significantly enhances the impact of DT on family firm performance. Family businesses exhibit a notable willingness to take strategic venture risks to protect their SEW. These findings align with conclusions drawn in related literature, supporting all hypothesized relationships proposed.Practical implicationsThe study has made an applied contribution by challenging the misconception that family firms are outdated and provides insights into supporting their approach to entrepreneurship, innovation and transgenerational entrepreneurship. Furthermore, it provides business families and consultants with a new view of SEW as a strategic asset.Originality/valueOur study adds to the literature by showing how entrepreneurial orientation catalyzes the positive impact of digital transformation on firm financial performance. We also highlight the contextual influence on family firm decision-makers' risk propensity, which affects SEW development and firm outcomes. This context dependency of SEW can hinder or enhance performance, offering new research and support avenues for family firms.

The COVID-19 pandemic and family business performance

This study examines the impact of the COVID-19 pandemic on corporate financial performance using a unique, cross-country, and longitudinal sample of 3350 listed firms worldwide. We find that the financial performance of family firms has been significantly higher than that of nonfamily firms during the COVID-19 pandemic, accounting for pre-pandemic business conditions. This effect is pertinent to firms with strong family involvement in management or in both management and ownership. We also identify the role of firm-, industry-, and country-level contingencies for family business financial performance during the COVID-19 pandemic. This study offers a novel understanding of the financial resilience across different types of family business and sets an agenda for future research on the drivers of resilience of family firms to adverse events. It also provides important and novel evidence for policymakers, particularly for firms with different ownership and management structures.

The impact of family business professionalization on financial performance: a multidimensional approach

PurposeThis study aims to broaden the multidimensional conceptualization of family business professionalization, and to investigate how professionalization influences the financial performance of family firms, in the context of private family firms.Design/methodology/approachTaking a quantitative research approach, the study empirically examines the effect of professionalization on family firm performance, using a sample of 111 privately held Turkish family firms. The hypotheses were tested using regression analysis and the independent samples t-test.FindingsThe results indicate that the professionalization of family businesses has a positive effect on their financial performance, and the professionalization of employees is the prominent dimension of professionalization in this effect.Research limitations/implicationsThis study advances the understanding of how professionalization influences family firm performance by providing additional empirical evidence regarding the positive influence of multifaceted family business professionalization on financial performance.Practical implicationsThe professionalization framework depicted in this study helps owners, managers, or consultants of family businesses assess the professionalization level of their firm and understand the performance effects of each of the family business professionalization dimensions on financial performance. It can also serve as a roadmap for family firms to professionalize and achieve better performance.Originality/valueUnlike previous studies, this study incorporates employees, organizational culture and work environment, often neglected in the family business literature, into the multidimensional family business professionalization construct, thus extending previous research. The study contributes to a deeper understanding of the relationship between family businesses professionalization and firm performance.

Does corporate social responsibility help the longevity of centenarian family firms in Europe?

Using a sample of 21 centenarian family firms from European countries over the 2008-2020 study period, we verify if corporate social responsibility (CSR) engagement can help the longevity of the centenarian family firms. In particular, consistent with the stakeholder theory and resource-based view, we find that the corporate social performance (CSP) has a positive impact on the corporate financial performance of family firms, even during a period affected by international financial crisis that stressed the survival of firms. Hence, based on the concept of CSR as a co-specialized asset that improves other assets, such as resilience, corporate identity, reputation and stakeholder influence capability, our results show that CSR engagement represents a key to longevity and a solution to the potential trade-off between the socioemotional wealth and the financial performance of centenarian family firms

Family Influence and Firm Performance: Evidence from the Covid-19 pandemic

The Covid-19 pandemic has spread with a speed and scale never seen before. Stock prices of all the market indices fell at a pace and level not seen since the Great Depression. This is the first study examining the financial performance of family and nonfamily firms around the world during the Covid-19 pandemic. Using a longitudinal sample of 791,928 firm-day observations for 3,882 firms in 43 countries and 10 industrial sectors, we show that financial performance of family firms has been significantly higher during the Covid-19 pandemic, as compared to their nonfamily counterparts. The economic impact of the family effect on firm performance is substantial: the return spread between family and nonfamily firms equals almost 8.7% given the growth in the Covid-19 cases worldwide. However, the magnitude of the effect depends on the type of family influence on the firm, geographical location and industry concentration. These findings have important implications for both management theory and practice.

Impact of family succession on financial performance: empirical evidence from Bangladesh

PurposeAcademic research on the transgenerational performance differences among family firms in Bangladesh is still in its infancy. This paper delves into this issue to answer whether the financial performance of family firms run by second-generation family members is different from their predecessors and nonfamily firms.Design/methodology/approachThe study employs panel data analysis that attempts to conceptualize the performance difference, quantified in terms of profitability and return, between founder- and second-generation-run public companies in Bangladesh. Moreover, cross-sectional regressions extend the research paradigm to investigate and validate whether heir-controlled family firms perform differently than nonfamily firms or firms that are yet to experience ownership succession within a family.FindingsThe study indicates that family firms perform better when founding family members are in control compared to second-generation-run family firms. Moreover, further analysis suggests that heir-controlled family firms do not show a significant difference in performance compared to firms that never had a family succession in its managerial positions. The implications are that there could be nonfinancial family-centric motivations for family business ownership transition.Practical implicationsFamily succession of firm ownership is venerated without necessarily a validation of its financial merit. In Bangladesh, this is too often a de facto transfer of leadership within family firms. This study can act as a reference point to understand that family succession of firm ownership in Bangladesh may not necessarily be in the best financial interest of a firm.Originality/valueThe literature on family firms propounds a plethora of vacillating conclusions and opinions. This paper adds this body of empirical literature into an exercise of formal logic. Such an empirical investigation into the financial performance of Bangladeshi family firms, visualized through the lens of leadership transfer to a second-generation family member, has not been extensively studied in contemporary literature.

Measurement Bias in the Financial Performance of Family Firms

Notwithstanding the impressive body of research focusing on the financial performance of family-led enterprises over their non-family counterparts, no aggregate conclusion can be extrapolated from the existing data. In this article, we show that performance inference is biased and depends exclusively on the combined choice of financial measurements and family taxonomy; any general conclusion drawn from a specific pair of metrics should be interpreted with caution. We analyze the cross-combinations of eighteen variants of family firms with twenty financial metrics to show that family attributes greatly influence hybrid performance measures, display a notable effect on accounting-based metrics but have almost no impact on market returns. These peculiar results are ascribed to the fact that family businesses tend to favor creditors and directors over investors.

FAMILY FIRM PERFORMANCE OVER THE BUSINESS CYCLE: A META‐ANALYSIS

AbstractThe financial performance of family firms has been widely studied in the literature. Combining the results of 155 primary studies from 35 countries with data about business cycles, we investigate how family firm performance changes over the business cycle. Using meta‐analytic estimation methods, we find that family firms outperform nonfamily firms in developed markets, irrespective of economic circumstances. This outperformance, although statistically significant, is very small and practically negligible. With regard to the business cycle, we find evidence for a procyclical effect in which the relative performance of family firms is lower in economically difficult times. Our study extends the literature on how family firm performance depends on macroeconomic factors.

Female Directors, Family Ownership and Firm Performance in Jordan

This study examines the impact of female directors on the financial performance of family and non-family Jordanian firms. A sample of 103 Jordanian public firms listed on Amman Stock Exchange for the time period 2009-2015 was selected. The study had a quantitative approach and used a panel data methodology. The data analysis was conducted using Ordinary Least Square Regression. ROA and Tobin’s Q were deployed as measurement of financial performance. The appointment of female directors does not have any significant impact on the financial performance of family firms. However, with regard to non-family firms, female directors appeared to have a negative impact on the performance of these firms. The impact of female directors on family firm performance merits further research in the context of different countries and cultures. Appointments based on qualifications and expertise is more likely to have a positive impact. Jordan is an under-researched area where the impact of female directors on the firm performance would merit further research. Differentiating between the impact of female directors on family and non-family firms would also merit further research, especially in the context of the conditions under which they are appointed.

Institutional logics, family firm governance and performance

Positive and negative views of family firms and their performance abound. Although there have been explanations for this divergence based on conditions of governance and context, the institutional environment has been less thoroughly explored as a source of these differences. We argue that the blend of family and market institutional logics in the regional communities where firms operate can have an important impact on the governance arrangements and financial performance of family firms. Specifically, we find that family-intensive governance is more common where family logic predominates in a region, and does best when this logic remains at modest levels or is countered by market logic. We test and support these notions in a comprehensive sample of private family firms in Italy, an ideal context in which distinct historically-determined logics exists among its 20 regions.

A Meta-Analysis About the Relationship between Family Firms and Firm Performance

My meta-analysis clearly shows that family management is a curse and not a blessing according to financial performance of family firms compared to nonfamily firms. Based on a univariate and multivariate meta-analysis of 270 studies from 42 countries, I addressed the main objective of my dissertation to investigate the financial performance of family firms compared to nonfamily firms. My first robust finding proves that family firms outperform nonfamily firms financially (Research question 1). This result endorses former meta-analyses and the majority of primary studies. My second finding (Research question 2) supports the finance research stream differentiating in market and accounting based measures. So, the market, represented by analysts, assumes that family firms do not outperform family firms. Contrary to what family firms report and document in their financial statements with accounting measures as my findings show. A third finding (Research question 3) is that the composition of primary studies samples, consisting of only publicly listed companies, only manufacturing or technological firms, do not influence the overall results. However, small and medium-sized companies report smaller financial performance indices and therefore reduce the dependent variable. The majority of SME's in almost all countries possesses less market power and therefore achieves smaller revenues (Cressy & Olofsson, 1997). The forth result (Research question 4) shows that the engagement of family management leads to a significant drop in financial performance of family firms and therefore family firms underperform nonfamily firms. Family managers in family firms, however, preserve the wealth of all family members and therefore the financial performance indices are not always the key. Again, nonfinancial goals should be drawn into conclusion in empirical analyses. My second objective to investigate the influence of institutional factors is addressed by a multivariate analysis revealing the associations among family firms, financial performance is sensitive to institutional factors (Research question 5): in Europe, the financial performance of family firms is lower compared to North America. That is, European publicly listed companies are mainly underrated compared to North America (Caldwell, 07.06.2014). Furthermore, in a society with high masculinity, family firms reveal a better financial performance compared to nonfamily firms. Masculinity is associated with male assertiveness, ambition, acquisition of wealth, and clearly distinct gender roles. But law regimes do not influence firm performance at all. Additional evidence comes from the investigation of the rule of law logic. A high rule of law excels the performance of family firms because they get a discount on their debt costs.

A Meta-Analysis of the Financial Performance of Family Firms: Another Attempt

This study presents the results of a meta-analysis of the financial performance of family firms. Drawing on a sample of 380 studies, we find that family firms show an economically weak, albeit statistically significant, superior performance compared to non-family firms. Furthermore, we find moderating factors to significantly condition the relationship. These results show that the positive effect of family firms on financial performance is more pronounced in samples of public and large firms and when an ownership definition of family firms is used. It is also notable that family firms do best when their performance is assessed by ROA, a measure that is not as influenced by financial structure as ROE. Based on the broad empirical evidence obtained, we discuss implications and avenues for future research.

A meta-analysis of the financial performance of family firms: Another attempt

This study presents the results of a meta-analysis of the financial performance of family firms. Drawing on a sample of 380 studies, we find that family firms show an economically weak, albeit statistically significant, superior performance compared to non-family firms. Furthermore, we find moderating factors to significantly condition the relationship. These results show that the positive effect of family firms on financial performance is more pronounced in samples of public and large firms and when an ownership definition of family firms is used. It is also notable that family firms do best when their performance is assessed by ROA, a measure that is not as influenced by financial structure as ROE. Based on the broad empirical evidence obtained, we discuss implications and avenues for future research.

Is Diversity Management Related to Financial Performance in Family Firms?

Policies and practices designed to foster diversity in organizations are now well integrated into a firm’s corporate strategy. In this article, we examine the role diversity management policies play in the financial performance of family firms, based on the premise that family firms have unique goals and governance structures that may affect the adoption of such policies. Using a longitudinal data set covering 952 publicly listed firms and multidimensional measures for diversity and financial performance, our empirical analyses suggest that family firms underperform nonfamily firms on diversity performance indicators. Interestingly, however, we find that the weaker diversity management practices of family firms may contribute to their robust financial performance.

A Meta-Analysis About the Financial Performance of Family Firms: Another Try

This study presents the results of a comprehensive meta-analysis on the financial performance of family firms. Drawing on a sample of 380 studies, we find that family firms show economically weak, albeit statistically significant, superior performance compared to non-family firms. Furthermore, we find moderating factors on country, firm, and family level to significantly intervene in the relationship: these results show for example that the positive effect of family firms on financial performance is more pronounced in samples of public and large firms, as well as when an ownership definition of family firms is used. Based on the broad empirical evidence obtained, we discuss implications and avenues for future research.

Family influences on firms: An introduction

Starting with a historical review of the developments in family business studies, the articles in this special issue emphasize the differential influences of family on the managerial behaviors and financial performance of family firms. This introduction explains why such investigations are important for the development of a theory of the family firm, provides a brief review of the contents and contributions of the articles, and concludes with a call for additional research on how and why families influence managerial behaviors and firm performance.