Management Of Family Firms Research Articles

Family management and corporate charitable donations in Chinese family firms: An inverted u‐shaped relationship

AbstractThis paper examines the influence of family management on corporate charitable donations. Drawing from the literature on socioemotional wealth, we propose that the level of family management and corporate charitable donations presents an inverted U‐shaped relationship, and that this inverted U‐shaped relationship is weakened by firm diversification levels and an unfair competition environment. An analysis of a comprehensive data set comprising 9266 firm‐year observations, encompassing 1445 publicly listed Chinese family firms from 2010 to 2021, provides empirical support for our hypotheses. The results remain robust when accounting for endogeneity concerns. This study contributes to the growing body of research on environmental, social, and governance in the field of finance and accounting, and enhances our knowledge of sustainability practices in family firms.

The role of female directors in family firms’ annual report´s readability

PurposeThis paper investigates the impact of board gender diversity on the readability of the annual reports of family-controlled public companies.Design/methodology/approachGrounded in the premises of the restricted and extended views of the socioemotional wealth (SEW) approach and executive power theory, this paper explores the ways in which family-affiliated female directors influence report readability in a sample of 133 publicly traded US companies listed in the Fortune 1,000. We use the system GMM estimator, which deals with two key sources of endogeneity by controlling first for reverse causality, using the lags of the endogenous variables as instruments, and then for omitted variables, capturing the individual effect.FindingsOur analysis confirms that the significant enhancement in annual report readability is associated with the presence of female family directors, particularly those who are insiders within the company. In contrast, non-family female directors and family outsider directors appear to have a negative impact on annual report readability.Originality/valueWhile scholars have increasingly focused on variations in annual report readability among family firms, the contribution of female directors to this phenomenon has received minimal attention. In our study, we integrate the theories of restricted and extended SEW perspectives with the theory of women’s executive power within the board. This integration is essential for considering two critical factors: firstly, the primacy of their SEW objectives, and, secondly, their legitimacy within the board.

Family involvement in management and risk-taking of family firms: The moderating role of kinship composition

Corporate risk-taking is a crucial factor that influences firm growth, performance, and survival. Based on the socioemotional wealth and agency theories, we investigate the effect of family involvement in management on risk-taking by considering the moderating role of kinship composition. Using data on Chinese listed family firms, we find that increased family involvement in management significantly reduces family firms’ risk-taking level. The richness of family managers’ kinship weakens the negative effect of family involvement in management on the risk-taking level. Our study enriches the socioemotional wealth and agency theories, by introducing insights of the differential order mode perspective, and demonstrates the significance of kinship ties of family managers on family firms’ risk-taking strategies.

Fair play in family firms: examining the perceived justice of performance management systems

PurposeThis study examines the intricate relationship between family influence and perceived justice in performance management systems within family firms. Recognizing the unique dynamics that family ownership brings to human resource practices, the research aims to delineate how family presence affects both the process and the perception of fairness in performance evaluations.Design/methodology/approachUsing a conceptual framework, the research adopts a dual-method approach, combining a comprehensive literature review with theoretical modeling. The study synthesizes existing research and theoretical insights to explore the effects of family influence on the perceived fairness of performance management practices.FindingsThe findings reveal that family influence profoundly shapes fairness perceptions in performance management, impacting family and non-family employees. It affects systems' design, implementation and reception, with mechanisms including resource distribution and criteria alignment. Specifically, family influence molds fairness perceptions within the performance management process, enhancing organizational performance and fostering trust in family businesses, thus supporting sustainable growth.Originality/valueThis study contributes to the family business and human resource management literature by providing a nuanced understanding of how family dynamics influence perceptions of justice in performance management. It underscores the dual role of family influence in enhancing and complicating fairness perceptions, thus offering a balanced view that can inform academic research and practical HR management in family firms.

Introducing professional managers, salary incentive and family business innovation

This paper provides an in-depth discussion of the impact of introducing professional managers on the innovation of family firms for a sample of A-share listed companies in China from 2017 to 2022. The findings show that introducing professional managers in family firms significantly positively contributes to corporate innovation. In addition, the study finds that both equity and cash incentives given to professional managers are conducive to further promoting corporate innovation. The results of this study are of great practical significance for how family firms can rationally utilize professional managers to enhance corporate innovation.

Mapping research on knowledge management in family firms: a bibliometric analysis

PurposeGiven the growing interest in the topic of knowledge management (KM) in family firms (FFs) and the subsequent increasing number of papers published, this study aims to review the field to identify and analyze the main themes and trends.Design/methodology/approachThis study applies bibliometric techniques to a sample of 146 papers published from 2007 to 2023 and their 8,126 unique cited references. Bibliometric coupling is performed on the sample papers to explore the current intellectual structure of the field of KM in FFs, whereas cocitations analysis is performed to investigate the different literature streams that served as roots for the development of such a field.FindingsBibliographic coupling reveals that sample papers can be grouped into four clusters, and, through papers content analysis, the author identifies their core themes as knowledge sharing, innovation, knowledge-based dynamic capabilities and intellectual capital. Cocitation analysis of the cited references revealed four main clusters that can be considered the literature streams that served as roots for the development of the field, i.e. knowledge-based view, socioemotional wealth, strategic management and social capital (as a theory and as a resource).Originality/valueThis study contributes to the literature on KM in FFs by extending prior systematic review efforts with bibliometric analyses and combining these results to highlight connections between the main research themes around which scholars have debated (i.e. the clusters identified through bibliometric coupling) and their theoretical foundations (i.e. the clusters identified through cocitation analysis). This study also has practical implications by synthesizing and informing managers about FFs’ advantages and weaknesses in the KM process.

Emotional Compass: Exploring the Socio-Emotional Wealth's Role in Guiding Change Implementation in Family Enterprises!

This research delves into the intricate impact of socio-emotional wealth (SEW) on the behavioral patterns of family firms during the implementation of organizational change. Employing the ambidexterity theory as a conceptual framework, the study scrutinizes 200 responses from proprietors and managers of family firms through a vignette-based investigation. The outcomes illuminate SEW as a pivotal guiding principle and determinant in the decision-making processes related to change. SEW is identified not only as an originating factor but also as a resultant outcome of change dynamics. Family firms demonstrate a propensity to embrace change in anticipation of potential advantages in terms of SEW, juxtaposed with a hesitancy when confronted with perceived risks. Furthermore, the study underscores a continuous reciprocal influence that characterizes the dynamic interplay between SEW and change. This influence extends beyond specific stages, permeating strategic and operational realms within the organizational context.

Sustainability performance disclosure and family businesses: a perspective article

PurposeThe deeper understanding of the disclosure of external and internal dynamics of family firms necessarily places the issue of sustainability as one of the most pressing needs from both a research and managerial perspective. Therefore, this perspective article contributes to the debate of sustainability performance disclosure in family firms, proposing a research agenda.Design/methodology/approachThis study has organized the discussion around those elements that most significantly impact the propensity to disclose, with a specific focus on the interconnections and interrelations within them. The proposed research agenda is developed around three key elements: “how” firms disclose, “the reason why” they do it and “what” disclose of their performance(s).FindingsTo better understand “how” family firms should disclose their performance, it is suggested to engage in proactive stakeholder engagement to preserve long-term socioemotional wealth. “The reason why” for disclosure is still associated with the legitimization of family firms from an economic, social and environmental point of view. Finally, the “what” depends on several factors, such as the regulatory framework and the market involved.Practical implicationsThis paper contains suggestions for family firm managers, consultants and policymakers that are approaching corporate social responsibility (CSR) and non-financial reporting or sustainability disclosure overall, providing an overview of relevant factors influencing this transition process.Originality/valueThis paper suggests a logical framework to combine these three elements of the debate as strictly interrelated to foster the sustainability performance disclosure of family firms.

Religion in Family Firms: A Socioemotional Wealth Perspective on Top-Level Executives with Perceived Religiosity

The extent and mechanisms through which religion intertwines with decision-making processes in family firms remain inadequately understood. Family firm owners, driven by their commitment to ethical business practices and the safeguarding of their socioemotional wealth, actively seek cues to inform their decision-making processes. This research demonstrates that, among these guiding cues, top-level executives’ perceived religiosity emerges as a relevant factor. Building upon the socioemotional wealth perspective and conducting a longitudinal analysis based on listed family firms between 2009 and 2018, our findings reveal a positive association between family voting rights and the presence of board members perceived to be religious. Furthermore, this relationship is less pronounced if family firms operate in industries with high research and development intensity. Our study confirms that boards with high shares of religiously perceived directors are positively associated with the appointment of chief executive officers perceived to be religious during succession events. We thereby present a unique perspective that acknowledges perceived religiosity as a micro-level constituent shaping board membership and successor selection. This investigation captures the intricate interplay between religion and family firms under a socioemotional wealth umbrella, offering important insights to the family business ethics discourse. Our research also offers practical implications for board and leadership diversity management in family firms.

Strategic earnings management in family firms

AbstractWe examine how family firms strategically manage earnings by using discretionary accruals (AEM) and real activities (REM). Using a sample of privately controlled but publicly listed firms in China between 2007 and 2018, we find that, under normal circumstances, family firms are less (more) likely than nonfamily firms to use REM (AEM) for earnings management, and they use REM and AEM as substitutes. However, when firms are under pressure to meet important earnings benchmarks that are critical to the survival of their businesses, family firms increase their use of REM more than do nonfamily firms. Finally, family firms strategically use REM to improve their future firm performance. This study challenges the unidirectional relationship between family firms and earnings management that is typically documented in existing studies.

Strategic Earnings Management in Family Firms

Strategic Earnings Management in Family Firms

Unravelling the determinants of family firms' governance: the family protocol

PurposeFamily businesses are essential to the global economy but often grapple with family-related issues, especially during succession. This study explores how governance tools like the family protocol (FP) mitigate conflicts by setting standards for family firm management and continuity. Pioneering the use of game theory and adverse selection setups in family business governance, this research uncovers FP determinants.Design/methodology/approachThis research employs game theory and adverse selection setups to delve into the strategic decision-making processes of stakeholders in family firms. The authors break new ground by applying principal–agent theory (PAT) to family business governance structures. This innovative approach uncovers the determinants of the FP, enhancing the authors’ understanding of family firm dynamics.Findings The authors emphasize the importance of custom governance structures, such as the FP, in managing complex family-business interactions. These structures mitigate conflicts and promote smoother transitions during succession, ensuring family firm continuity. This study identifies key determinants, and these results will aid founders, families and practitioners in achieving smoother transitions, ensuring family firm continuity.Originality/valueThis research pioneers game theory and PAT applications in family business governance, shedding light on the effectiveness of customized governance mechanisms. By identifying FP determinants, the authors contribute to a deeper understanding of family firm dynamics. The findings have practical implications for founders, families, practitioners and consultants, promoting the long-term success and harmony of family firms in the global economy.

Family firm entrepreneurship: An experimental study

ABSTRACT Family managers’ entrepreneurial intentions (EI) play a crucial role in the long-term success of family firms. Previous research has highlighted education as a key driver of EI but has failed to consider the unique socialization processes within business families and their impact on the education-EI relationship. This study aims to fill this gap by examining the direct and indirect effects of education on family managers’ EI. By combining the integrated model of EI and research on business families’ socialization patterns, a study was conducted with a role-playing experimental design involving 412 family firm managers. The results indicate that entrepreneurial self-efficacy (ESE) serves as a mediator between education and EI, while the ESE-EI relationship is further mediated by risk perceptions. Interestingly, no direct effect of education on EI was found, suggesting that the influence of education on EI follows distinct patterns within business families.

Governance in family firms: how to ensure continuity

Family firms play a key role in the world economy, yet their success is often plagued by family-related issues and conflict. Succession is one of the most critical hurdles they face. The purpose of this paper is to illustrate how specific governance instruments, such as the family protocol, can aid mitigate the conflicts by establishing a set of guidelines and procedures to aid govern the operation, management and continuity of family firms. To study the underlying strategic decision making process of the multiple stakeholders involved, this paper resorts to game theory. The results will provide valuable determinants of the family protocol which may aid smooth managerial transfer in the family firm and uphold harmony in the family setting.

CEO tenure and environmental fraud for listed family firms

AbstractThis paper examines CEO tenure's impact on the environmental fraud committed by listed Chinese family firms from the year 2012 to 2019. Using a bivariate probit model, we provide robust evidence that CEO tenure is positively related to the environmental fraud commission, indicating that longer‐serving CEOs are more likely to violate environmental regulations and to commit fraud in the family firms. Besides, when there is a higher proportion of independent directors, CEO tenure is negatively related to the environmental fraud commission but positively related to fraud detection. Moreover, when there is a greater proportion of family members in senior positions, CEOs with longer tenure are more likely to commit environmental fraud. Our additional analysis finds that compared to non‐family professional CEOs, family CEOs are more likely to commit environmental fraud. Overall, our results call for the introduction of CEO tenure limits and the increased recruitment of independent directors in family firms.

Crisis management in family firms: do religion and secularization of family decision-makers’ matter?

PurposeThe unique dynamics of family firms (FFs) shape the management of financial crises. Religious and secular reasons, as a defining characteristic of this type of firm, provide a reference system for key management decisions. This paper aims to explore the under-researched topic of differences in FFs' crisis management between religious and secular family decision-makers (FDMs), considering secularization in developed countries.Design/methodology/approachThe paper draws on a qualitative-empirical study of 14 large FFs from the DACH region (Germany, Austria and Switzerland), through both a media analysis and semi-structured interviews with FDMs who have significant influence on key management decisions.FindingsDespite secularization, religion continues to influence managerial decisions such as crisis management in the DACH region. The findings show that crisis management differs across religious and secular FDMs, demonstrating the substantial impact of religious and secular reasons on operational and financial measures. Thus, religious and secular reasons may partially explain the complex and ambivalent crisis management of FFs. This indicates that religion shapes FF's key management decisions in the increasingly secularized DACH region. Religious FDMs are accountable to both the firm and to God, which fosters their own personal and financial resources during crisis management.Originality/valueThis paper contributes to the existing literature by exploring the impact of religion and secularization within developed countries. Further, it offers deeper insights into FF's crisis management and is one of the first studies to assess the impact of religion and secularization on operational and financial measures. This research derives five propositions for further research and discusses a broad range of original implications for theory and practice.

The Effect of Working Capital Management and Family Ownership on Profitability and Liquidity (Study of Family Companies Listed on the Indonesia Stock Exchange in 2018-2022)

This article aims to examine the impact of working capital management and family ownership on the profitability and liquidity of family-owned companies listed on the Indonesia Stock Exchange from 2018 to 2022. The research utilizes a quantitative approach by analyzing financial data about working capital, family ownership, profitability, and company liquidity. The data used in the study is obtained from publicly available financial reports of family-owned companies listed on the Indonesia Stock Exchange. Data collection is conducted through a thorough review of documentation. The research sample consists of active family-owned companies that possess complete data for analysis. Multiple linear regression is employed to assess the relationship between working capital management, family ownership, profitability, and company liquidity. The findings reveal that both working capital management and family ownership significantly influence the profitability and liquidity of family firms. These findings offer valuable insights for family firm management to enhance their financial performance. Effective management of working capital can contribute to improved profitability and liquidity, while family ownership also plays a crucial role in determining the financial performance of family-owned companies. Furthermore, in addition to its practical implications, this research contributes theoretically to the existing literature on working capital management and family ownership, specifically in the context of family-owned companies in Indonesia.

Turnover intentions of non-family employees in family firms – the influence of leader mindfulness, LMX quality and affective commitment

PurposeLeveraging the mindfulness theory and the social exchange theory, this study examines the influence of perceived leader mindfulness (PLM) on turnover intentions (TOI) of non-family employees (NFEs) working in family firms. The study investigates whether the above relationship is mediated by employee perceptions of leader–member exchange quality (LMX quality) and their affective commitment (AC).Design/methodology/approachA conceptual framework is proposed that hypothesizes inverse relationship between PLM and TOI, which is posited to be mediated by both LMX quality and AC. The hypotheses are tested through survey data collected from 254 NFEs working in various family-owned businesses in Malaysia. The data analyzed through partial least square structural equation modeling (PLS-SEM).FindingsThe results indicate that PLM has a positive influence on both LMX quality and AC. Moreover, PLM has a strong negative affect on TOI. In terms of results of mediation analysis, it appears that two mediation hypotheses out of four are significant, that is mediating effect of AC between PLM and TOI and LMX quality between PLM and AC. However, the mediating role of LMX quality between PLM and TOI and the sequential mediation hypotheses were both non-significant.Research limitations/implicationsThe findings of the study imply is that to ensure retention of qualified and talented NFEs, mindfulness of family firm leaders plays a significant role in ensuring lower TOI. Furthermore, such a goal is better achieved by ensuring that such employees are supported through leadership that leads to their development of better LMX quality and AC towards the organization. The study however is limited, as other potential exogenous variables that may influence TOI were not considered.Practical implicationsLosing employees that join a firm and acquire valuable skills and experience is a significant concern for family firms that are known for discriminating between employees related to the owners and outsiders. This study presents evidence for owners and managers of family firms that by focusing on mindful behavior and working towards developing better LMX quality and AC of NFEs, the organization can reduce TOI of such employees.Originality/valueThis study contributes to the under-researched and fragmented literature on relationships between PLM among NFEs and TOI of such individuals working in family firms. Moreover, this appears to be the first study that investigates mediating roles of and LMX quality and AC among NFEs in the above relationship.

Who let the dogs out? How underdog biographies told by family firms affect consumers’ brand attitude

PurposeBrand stories are often created around the company’s humble beginnings as an underdog. The authors explore the effects of who is telling the underdog story and thus draw attention to the nature of the brand source by differentiating between family and non-family firms. The authors expect that who is telling the underdog story impacts consumers’ attitude toward the brand in terms of brand authenticity and trustworthiness perceptions.Design/methodology/approachThe authors conducted an online experiment with a 2 × 2 between-subject design and an overall sample size of 314 respondents.FindingsMost importantly, the authors find that the family-firm nature of the brand storyteller significantly impacts the underdog effect. The positive effects of underdog biographies on brand attitude in terms of authenticity and trustworthiness loom significantly larger for family firms compared with non-family firms.Practical implicationsThe authors find that the underdog effect is significantly stronger for family firms that tell the underdog story. Managers of family firms with underdog roots should take advantage of this finding by integrating underdog stories into their marketing concepts. The findings of this study show that the communication of a company’s roots can serve as a valuable tool to build and maintain a positive brand image and help to increase purchase intentions, which is particularly true for firms capitalizing on their family nature when telling the underdog story.Originality/valueThe authors combine research on brand stories using the underdog effect with research on the consumer’s perception of family firms, further exploring the role of the brand storyteller in underdog narratives, resulting in important theoretical as well as practical implications.

Exploring sustainability disclosures in family firms: a bibliometric analysis

Families own two-thirds of the world’s private businesses. It is an organizational model that has succeeded in various sizes, both small and large publicly listed companies. This study aims to explore the developments in sustainability reporting for family firms. The current study employs bibliometric analysis to examine family firms’ sustainability literature’s conceptual structure and influential aspects. Our study recruited 131 research documents from 2004 to 2021 based on our inclusion criteria. The findings from the conceptual analysis, the co-occurrence network of keywords analysis yields three clusters: CSR disclosures and corporate governance in family firms of emerging economics (red cluster), while red and green clusters focus on environmental performance, earnings management, and corporate governance in family firms. Our study has also highlighted the influential aspects of sustainability in family firms’ literature. Our findings have significant implications for researchers and policymakers. Our findings could be helpful to both family businesses and sustainability researchers. The study contributes to the business literature by illuminating the new research directions in sustainability reporting by family firms using bibliometric techniques.