Non-family Firms Research Articles

Board gender diversity and voluntary disclosure: moderation of family ownership in India

Purpose Given the dominance of family ownership in India, this paper aims to examine whether the impact of board gender diversity (BGD) on voluntary disclosure (VD) is moderated by family ownership. Design/methodology/approach Based on a panel data set of the top 100 listed Indian firms for five years, this study examines the impact of BGD on VD by segregating the sample between family-owned and nonfamily firms. For empirical analysis, we use appropriate panel data models. For robustness, we employ a three-stage least square (3SLS) model. Findings The findings reveal the significant positive impact of BGD in terms of its different measures on VD for family and nonfamily firms. However, the impact becomes insignificant for nonfamily-owned firms when female directors are not substantially represented on the board. Originality/value This study extends the ongoing debate about the outcomes of the mandatory gender quota on board by providing novel evidence on the difference between the impact of BGD on VD for family and nonfamily firms in the Indian context.

Mitigating Underinvestment through Accounting Conservatism: A Comparative Study of Family and Non-Family Firms in Taiwan

This study examines the role of accounting conservatism in mitigating underinvestment due to internal cash flow volatility in Taiwan-listed and OTC companies from 2013 to 2022, comparing family and non-family firms. Utilizing regression analysis, we assess how accounting conservatism influences investment decisions under varying conditions of cash flow stability. Our findings reveal that accounting conservatism significantly alleviates underinvestment across all sampled firms, particularly in family firms where its impact becomes pronounced under high cash flow volatility conditions. In contrast, conservatism does not significantly affect investment decisions in stable cash flow scenarios. Additionally, the study finds that accounting conservatism can reduce capital costs under high cash flow volatility, thereby promoting investment. These insights provide a new understanding of the function of accounting conservatism across different firm types and offer practical guidance for financial decision-making.

Family firms and the collaborative advantage: unveiling innovation efficiency across partnership types

PurposeBased on the resource orchestration perspective, this paper aims to examine whether family firms are more efficient in their collaboration for innovation process than non-family firms, considering different types of collaboration for innovation depending on the kind of partner.Design/methodology/approachThis study empirically develops and tests the hypotheses based on a panel data sample of 14,937 firm-year observations from 1,867 Spanish manufacturing firms over the period 2007–2014, performing a Propensity Score Matching (Propensity score matching)-based analysis.FindingsResults reveal that family firms outperform non-family firms, despite less collaboration and innovation inputs, thereby extending the ongoing debate surrounding the innovation efficiency of family firms. Family firms obtained better results through vertical collaborations for innovation, both in terms of product and process innovations. For horizontal collaborations, family firms only outperform their non-family counterparts in process innovation. When collaborating with universities and other research centers, there are no significant differences in the innovation outcomes between the two groups.Originality/valueRecent literature points out that more research is needed to know when, how and under what circumstances family firms show superior innovative efficiency. This work empirically proves that family firms outperform non-family firms in collaboration for innovation. However, not all collaboration partners help family firms to reach this superior innovative efficiency. Family firms obtained better results just through vertical and horizontal collaborations.

Rethinking family business resilience: an empirical examination of family firms’ performance amid the COVID-19 pandemic in the US

ABSTRACT Contrary to recent research suggesting heightened resilience in family firms amid crises such as COVID-19, our study based on data from publicly traded firms in the US, challenges this narrative. We find that family-owned firms did not exhibit superior market performance or profitability during the pandemic compared to their non-family counterparts, or lower idiosyncratic volatility. Moreover, there were no discernible differences in how family and non-family firms perceived the effects of COVID-19 related exposure, risk, and sentiment. A plausible explanation for this finding could be the isomorphic pressures during a pandemic where neither family nor non-family firms may better leverage their resources. Our contrary evidence is important as it challenges existing assumptions and calls for a more critical evaluation of family firm resilience during the crisis.

Innovation and firm performance: influence of ownership and professionalization

ABSTRACT Empirical research has confirmed a mostly positive relationship between innovation and performance, but more work is needed to establish whether this relationship is homogeneous or whether it depends on other variables, such as ownership model (family/non-family) and who manages the company (owner/non-owner). This paper studies differences in the impact of innovation on productivity between family firms, owner-managed or professionalized, and non-family firms, also subdivided, for the first time in the academic literature, between owner-managed and non-owner-managed firms. A multistage model is used, controlling for endogeneity and selection bias issues. The results yielded by a large panel dataset of Spanish manufacturing firms suggest differences in the ability to benefit from innovation. These results confirm that, in non-professionalized firms, family ownership reduces the positive effect of innovation on productivity, while in professionalized firms, there are no significant differences between the family and non-family ownership model.

View of institutional ownership and value relevance in Indonesia: the nexus of accounting conservatism

PurposeOur study aims to explore the ownership structure and accounting conservatism in influencing the value relevance that we analyse through the paradigm of open innovation and socio-emotional wealth (SEW). We also extended the test to identify how firm size could affect value relevance.Design/methodology/approachThrough panel data testing, we collected all issuers on the stock exchange for the 2016–2018 period. The total collected observations are 735 observations from various industries.FindingsThe results of the study provide empirical evidence that institutional ownership is more pronounce, especially in companies with high asset levels. We also conducted other tests to see it from the perspective of SEW. We divide companies into family and non-family companies. The results of this study indicate that institutional ownership has an effect on increasing value relevance, especially in family companies compared with non-family companies. The results of the study also indicate that accounting conservatism plays a more important role in increasing value relevance in non-family firms compared to family firms.Originality/valueThis study advances in two main ways. First, we use a SEW approach and an open innovation perspective. Second, we conducted tests for family and non-family firms.

How Public Support for Innovation Affect Entrepreneurial Orientation of Mexican Companies: The Moderating Effect of Being a Family Business

AbstractWe study the relationships between the input and network additionalities prompted by public support for innovation and entrepreneurial orientation and whether being a family business moderates these relationships. The results, based on a dataset of 115 Mexican firms, show that the changes generated by public support for innovation programmes encourage entrepreneurial orientation. Additionally, family firms have a differential ability to transform input and network additionalities into entrepreneurial orientation. This study contributes theoretically and practically by highlighting the positive effects of research and development support programmes on a firm’s entrepreneurial orientation. It also points out the need to consider family status when designing public policies, since our results reveal that family and non-family firms are not equally efficient in transforming resources into entrepreneurial orientation and that family firms that drive networking through the rules of the subsidy do not trigger the expected potential benefits.

Family firm successions: First-generation transitions in Latvia

We examine the emergence, succession, and performance of the initial cohort of family firms in Latvia. Latvia offers a natural setting to examine succession challenges faced by first-generation firms because a majority of these firms were established shortly after the country regained independence in the early 1990s. Our findings indicate that in 44% of sample firms the founding family did not have a majority stake at incorporation, but accumulated a majority stake over the first few years (1991–1999). It takes seven years for the average family ownership stake to exceed 75% and 23 years for firms with second-generation owners to reach 16% of the sample. Notably, approximately 80% of the sample firms are still majority-owned and managed by their founders. In line with previous research, we find that family firms outperform nonfamily firms by 3.1% in return on assets (ROA).

The impact of family ownership on tax avoidance: International evidence

Motivated by the global interest on tax avoidance and the unique nature and contribution of family firms to the global economy, this study examines the impact of family ownership on the tax behaviour of firms listed in 38 capital markets from 2008 to 2019. The study is the first to investigate both conforming and nonconforming tax avoidance practices across family and non-family firms using an international setting. The empirical findings document that family ownership is associated with lower conforming and nonconforming tax avoidance. The result is attributed to the reputation cost of tax avoidance that is higher in family firms due to socioemotional wealth preservation considerations that discourage tax avoidance practices. In addition, eponymy serves as a disciplining mechanism that further reduces tax avoidance in family firms. Finally, the cultural dimension of power distance -the societal belief that the members of an organization are not equal- attenuates the restraining effect of family ownership on tax avoidance.

Reputational risk and firm performance: Family versus nonfamily firms in different regulatory environments

This paper explores the relationship between reputational risk and firm financial performance in both family and nonfamily businesses. Relying on an international sample of over 5,000 listed firms from 2007 to 2019, we find that family firms have significantly lower reputational risk, and the impact of reputational risk on financial performance is lower in family firms. However, these findings vary across different macro-regulatory environments. In countries with poor regulatory quality, the effect of reputational risk on performance becomes positive, and family firms strengthen this positive influence. We attribute the findings to socioemotional wealth (SEW) theory and rent-seeking theory.

When Do Shareholder Agreements Add Value? Mitigating Superprincipal-Agency Conflicts in Family Firms

Researchers are divided on whether shareholder agreements (SAs) improve or hurt firm value. We offer family firms as a context where SAs add value and explain why; SAs limit “superprincipal” agency conflicts between family owners and other family members. A panel of French firms and a second study of French Initial Public Offerings show shareholders value SAs more in family than in nonfamily firms. Among family firms, SAs add greater value when weak governance undermines family owners’ resistance to other family members’ demands. Our study helps reconcile competing theory about SAs and distinguishes superprincipal conflicts from other family-firm agency problems.

Are family firms green?

AbstractThis study examines environmental management practices of 1690 family and nonfamily firms from 29 countries and 19 industrial sectors over an 8-year period. We show that the family effect on firm environmental management practices ranges substantially, from extremely negative to no effect at all. Moreover, the magnitude of the effect depends on the type of firm, the industrial context, the type of economy, and the stages of the business cycle. This study offers a novel understanding of the extreme heterogeneity of environmental management practices of family businesses and serves as a springboard for future research aiming to better understand the environmental strategies of publicly traded firms with concentrated ownership structures. It also provides important and novel evidence for policymakers, investors, and business owners, particularly for firms with different ownership and management structures.

Networks, ownership and productivity does firm age play a moderating role?

Purpose The purpose of this study is to investigate whether and how inter-firm cooperation and firm age moderate the relationship between family ownership and productivity.Design/methodology/approachWe first estimate the total factor productivity (TFP) of a large sample of Italian firms observed over the period 2010–2018 and then apply a Poisson random effects model.FindingsTFP is, on average, higher for non-family firms (non-FFs) than for FF. Furthermore, inter-organizational cooperation and firm age mitigate the negative effect of family ownership. In detail, it is found that belonging to a network acts as a moderator in different ways according to firm age. Indeed, young FFs underperform non-FF peers, although the TFP gap decreases with age. In contrast, the benefits of a formal network are high for older FFs, suggesting that an age-related learning process is at work.Practical implicationsThe study provides evidence that FFs can outperform non-FFs when they move away from Socio-Emotional Wealth-centered reference points and exploit knowledge flows arising from high levels of social capital. In the case of mature FFs, networking is a driver of TFP, allowing them to acquire external resources. Since FFs often do not have sufficient in-house knowledge and resources, they must be aware of the value of business cooperation. While preserving the familiar identity of small companies, networks grant FFs the competitive and scale advantages of being large.Originality/valueDespite the wide but ambiguous body of research on the performance gap between FFs and non-FFs, little is known about the role of FFs’ heterogeneity. This study has proven successful in detecting age as a factor in heterogeneity, specifically to explain the network effect on the link between ownership and TFP. Based on a representative sample, the study provides a solid framework for FFs, policymakers and academic research on family-owned companies.

What is Your Reference Point? How Price Volatility and Organizational Context Affect the Reference Points of Family and Nonfamily Managers

Drawing from prospect theory, we use an experimental study design to explore how and why reference points of managers of family and nonfamily firms differ. We contribute to research on the role of economic theories for family businesses by elaborating on decision-making mechanisms in the context of family firms. Furthermore, we investigate whether family and nonfamily managers within family firms vary in their investment decisions. Our study demonstrates the importance of price volatility as a determinant of reference points and shows how the same type of information can lead to different reference points based on whether the manager is from a family or nonfamily firm.

Strategic Change in Family Firms: A Review From an Institutional Environment and Firm Size Perspective

Using a framework that intersects strategic management and institutional economics, we show how differences in institutional environments and firm resources influence different types of strategic change (i.e., internationalization, innovation, and diversification) in family firms. We review 193 quantitative and qualitative articles to identify differences in strategic change and their performance consequences among family firms and between family and nonfamily firms. We conclude that institutional environments and firm resources impact not only the extent family firms engage in different types of strategic change but also their performance and long-term survival.

Hedge fund activism in family firms

AbstractResearch SummaryThis article examines the antecedents and outcomes of hedge fund activism in family versus nonfamily firms. We find that activist hedge funds are less likely to initiate campaigns against family firms than nonfamily firms, but the cumulative abnormal returns to announcements of campaigns against family firms exceed those of nonfamily firms. The presence of one or more family members on a firm's board of directors appears to be a key impediment to hedge fund activism in family firms. Additionally, activist hedge funds are more likely to use hostile tactics and demand more substantive changes in their campaigns against family firms than nonfamily firms. Together, these findings contribute to the agency theory‐based literatures on hedge fund activism, family firms, boards of directors, and corporate governance.Managerial SummaryActivist hedge funds are a significant force in corporate governance, driving the companies they target to change their strategies, structures, and leadership. Family firms are prevalent and economically important, accounting for a third to a half of companies worldwide. This article compares hedge fund activism in family versus nonfamily firms. Activist hedge funds are about 41% less likely to initiate campaigns against family than nonfamily firms, but the average returns to successful activist hedge fund campaigns against family firms are about 2% higher than in nonfamily firms. These effects are especially pronounced when family members serve on a company's board of directors. Furthermore, activist hedge funds are more likely to use hostile tactics and demand more substantive changes in campaigns against family than nonfamily firms.

From modesty to market: shareholder reactions to humility rhetoric in family and nonfamily firms under media scrutiny

From modesty to market: shareholder reactions to humility rhetoric in family and nonfamily firms under media scrutiny

Acquisition activity: do firm age and family control matter?

This article examines the relationship between firm age and acquisition activity and how family and non-family firms differ in the number of acquisitions they undertake. Inspired by previous research requiring firm age as a focal aspect and literature studying the antecedents of acquisitions, we draw on the SEW perspective to test our hypotheses based on the analysis of the acquisition activity of Asia-Pacific public firms. Our empirical findings support a U-shaped relationship between firm age and acquisition activity. Moreover, the findings reveal that family firms engage in fewer acquisitions than non-family firms irrespective of the age of the firm.

So … are family firms more sustainable? On the economic, social and environmental sustainability of family SMEs

AbstractIn this work, we address the conflicting results that appear in the literature regarding whether family firms are more or less sustainable than nonfamily firms in each of the three dimensions, by focusing on the group that has been largely disregarded: small‐ and medium‐sized family firms (family SMEs). We set a number of hypotheses, which we test in a sample of Spanish manufacturing firms in the food and beverages sector, using structural equation modelling. We conclude that competing arguments coexist both in favour and against these firms being more or less environmentally and economically sustainable, which finally balance themselves out. However, we found out that family firms tend to take greater care of their closer stakeholders, which, together with the importance given to their social relations with external stakeholders, make them champions in terms of social sustainability. Our results show that family firms are able to be more socially sustainable without having to compromise their economic performance in the long term. Finally, as family firms are not an homogeneous group, we analyse whether our results are firm specific, taking into account the role that the number of generations that the family has run the business and the number of generations currently involved in the business exert on firm sustainability, thereby reaching at very interesting conclusions.

Measuring Efficiency Of Family And Non-Family Firm Amidst Covid-19 Times: Do They Perform Differently?

The outbreak of COVID-19 pandemic in early 2020 has inflicted serious financial distresses for most firms in multi-sectoral industries. Each of them was enforced to deal with the economic downturns by working more efficiently. In this case, family and non-family firms might perform differently to protect themselves from bankruptcy. This research aims to measure firm efficiency by employing a total of 52 entities listed on Indonesia Stock Exchange (IDX), 26 entities for each type of firms from 2019 to 2022, reflecting the times before, during, and after the pandemic. At the first stage, date envelopment analysis (DEA) with constant return-to-scale (CRS) input-oriented approach is employed to generate deterministic efficiency scores of each sample which the bias is then corrected using Simar and Wilson’s bootstrap technique. At the second stage, hypothesis testing is conducted to examine whether the difference in efficiency score between both types of firms is significant. The result shows that family and non-family firms do not perform differently during a 4-year of research period (p-value=0.136). Nevertheless, family firms exhibit a significant drop in 2020 (p-value=0.0061), where this condition reversed with a significant increase in 2021 (p-value=0.0002). Non-family firms perform more stably throughout the research years. Finally this research may contribute to the development of organization-related science, business, and strategic management. The way most family firms operate might reflect the socio-cultural attributes of a nation. There is no other similar study found since COVID-19 pandemic is still considered as a relatively new global health crisis.