scholarly journals The persistence of family firms: How does performance threshold affect family firm exit?

2021 ◽  
Author(s):  
Noni Symeonidou ◽  
Dawn R. DeTienne ◽  
Francesco Chirico
Keyword(s):  
Family Firms ◽  
English Summary ◽  
Future Generations ◽  
Family Influence ◽  
Firm Exit ◽  
Lower Performance ◽  
Threshold Theory ◽  
Exit Decisions ◽  
Future Work ◽  
Longitudinal Dataset

AbstractResearch on family firms provides mixed evidence of the effect of family ownership on firm performance and exit outcomes. Drawing on threshold theory and the socioemotional wealth perspective, we argue that family firms have lower performance thresholds than non-family firms, reducing the likelihood of firm exit. Using a longitudinal dataset of 1191 firms over the period 2008–2011, we find support for this contention, suggesting that performance threshold is an important, yet poorly studied, construct for understanding exits of family versus non-family firms.Plain English Summary Why firms with similar economic performance make different exit decisions? We find evidence that family firms have lower “performance thresholds” than non-family firms, reducing family firms’ likelihood of exit. Using a longitudinal dataset, we examine differences in performance threshold between family and non-family firms and help clarify why some firms persist with their ventures even though their performance may indicate they should exit the market. Our theory and related findings suggest that nonfinancial attributes such as identity, the ability to exercise family influence, and to hand the business down to future generations may affect family firms’ attitudes toward exit decisions. Our study contributes to sharpening our understanding of exit in family firms while motivating future work on exit strategies in family firms and other contexts.

Strategic Behavior in Family Firms

2022 ◽  
pp. 974-996
Author(s):  
Ismael Barros ◽  
Juan Hernangómez ◽  
Natalia Martín Cruz
Keyword(s):  
Knowledge Management ◽  
Strategic Behavior ◽  
Family Firms ◽  
Family Influence ◽  
Organizational Routines ◽  
Business Operations ◽  
Management Processes ◽  
The Family ◽  
Prior Literature ◽  
The Relationship

Previous research emphasizes that the participation of the family in business operations is the source of resources and capabilities that conditions the strategic behavior of the family firm. This influence has been recognized as “familiness.” However, this definition is contextualized from static reasoning that ignores the effect of family dynamics on the behavior and value generation of the family-owned business. Prior literature has recognized that the family influence has a dynamic character based on the idiosyncratic process of knowledge management that manifests itself in the company, dynamic familiness. This family capability is shaped by family organizational routines through the family influence and aims to increase its knowledge portfolios for the strategic use of its resources. This chapter addresses the relationship between family influence and the process of learning and knowledge management. The analysis of this relationship allows assessing how family influence can promote the generation of family organizational routines based on knowledge management processes.

Board Composition: Balancing Family Influence in S&P 500 Firms

2004 ◽  
Vol 49 (2) ◽  
pp. 209-237
Author(s):  
Ronald C. Anderson ◽  
David M. Reeb
Keyword(s):  
Family Firms ◽  
Balance Of Power ◽  
Family Influence ◽  
Independent Directors ◽  
Family Ownership ◽  
Board Composition ◽  
Public Firms ◽  
Founding Family ◽  
Board Representation ◽  
Balance Family

We examine the mechanisms used to limit expropriation of firm wealth by large shareholders among S&P 500 firms with founding-family ownership. Consistent with agency theory, we find that the most valuable public firms are those in which independent directors balance family board representation. In contrast, in firms with continued founding-family ownership and relatively few independent directors, firm performance is significantly worse than in non-family firms. We also find that a moderate family board presence provides substantial benefits to the firm. Additional tests suggest that families often seek to minimize the presence of independent directors, while outside shareholders seek independent director representation. These findings highlight the importance of independent directors in mitigating conflicts between shareholder groups and imply that the interests of minority investors are best protected when, through independent directors, they have power relative to family shareholders. We argue that expanding the discussion beyond manager-shareholder conflicts to include conflicts between shareholder groups provides a richer setting in which to explore corporate governance and the balance of power in U.S. firms.

scholarly journals Earnings Quality, Family Influence and Corporate Governance: Empirical Evidence from Malaysia

2021 ◽  
Author(s):  
◽  
Wan Adibah Binti Wan Ismail
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Audit Committee ◽  
Family Firms ◽  
Earnings Quality ◽  
Governance Structure ◽  
Family Influence ◽  
Family Ownership ◽  
The Board Of Directors ◽  
And Control

<p>This study investigates whether family ownership and control, and corporate governance are associated with earnings quality, and whether family influence in firms weakens the association between corporate governance and earnings quality. This study uses a panel sample of 527 publicly traded firms over the period 2003-2008 from the Malaysia Stock Exchange (Bursa Malaysia). Identifying family firms as firms in which family members hold a significant portion of shares and possess control over the board of directors, this study finds that family firms have significantly higher earnings quality. The results remain unchanged, even after using alternative measures of earnings quality and family influence. This study also finds that the earnings quality of firms in Malaysia is positively associated with the size and independence of the audit committee and negatively associated with the size of the board of directors. However, these relationships exist only for nonfamily firms. These results on the corporate governance variables suggest that the effectiveness of corporate governance could be mediated by family influence. Using multivariate regressions that include interaction variables for corporate governance and family firms, the study finds that the relationship between corporate governance and earnings quality is mediated by family ownership and control. The result is consistent with the argument that the monitoring role of corporate governance reduces when there is substantial control by family owners in a firm. Overall, this study concludes that family ownership and control drives higher quality earnings for firms regardless of their corporate governance structure.</p>

scholarly journals Maternal Socioeconomic Status and the Well-Being of the Next Generation(s)

2018 ◽  
pp. 280-302
Author(s):  
Kasey S. Buckles
Keyword(s):  
Social Sciences ◽  
Socioeconomic Status ◽  
Labor Market ◽  
Child Outcomes ◽  
Empirical Work ◽  
Well Being ◽  
The Other ◽  
Future Generations ◽  
Labor Market Success ◽  
Future Work

A rich literature in economics and the other social sciences has shown that improvements in women’s socioeconomic status (SES) can also improve the well-being of their children. This chapter identifies several channels for this effect, drawing on both theoretical and empirical work in economics. Empirical evidence on the effects of maternal SES on child outcomes like health, education, and labor market success is presented, with a focus on recent work using new datasets and methodological innovations that allow for credible identification. The chapter also discusses emerging evidence that shocks to maternal well-being can affect not only a woman’s own children but also future generations. Finally, the chapter highlights several fertile areas for future work.

Innovativeness in family firms: a family influence perspective

2010 ◽  
Vol 38 (1) ◽  
pp. 85-101 ◽  
Author(s):  
Franz W. Kellermanns ◽  
Kimberly A. Eddleston ◽  
Ravi Sarathy ◽  
Fran Murphy
Keyword(s):  
Family Firms ◽  
Family Influence

Informational efficiency and governance in restricted share settings: boosting family business leaders' financing decisions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Daniel Dupuis ◽  
Virginia Bodolica ◽  
Martin Spraggon
Keyword(s):  
Family Firms ◽  
Family Influence ◽  
Informational Efficiency ◽  
Negative Effects ◽  
Potential Measurement ◽  
Content Type ◽  
Financing Decisions ◽  
Restricted Stock ◽  
Information Opacity ◽  
Dual Class

PurposeVolume-based liquidity ratios suffer from potential measurement bias due to share restriction and may misrepresent actual liquidity. To address this issue, the authors develop two modified metrics, the free-float liquidity and the alternative free-float illiquidity ratios. These measures are well suited to estimate liquidity in the presence of trading constraints, as can be found in closely held/state-owned entities, IPOs/SEOs with lockup restrictions, dual-class share structures and family-owned businesses.Design/methodology/approachThe authors modify the turnover illiquidity ratio, where the number of outstanding shares is scaled by the public free float, and use natural log transformation to normalize free-float liquidity. Our dataset is composed of daily observations for US stocks included in the S&P 500 index over the 2015–2018 period. To test the validity of free-float (il)liquidity ratios, the authors perform a correlation analysis for various liquidity metrics. To examine their empirical efficiency, the authors employ pooled OLS regression models for family firms as a subsample of liquidity-constrained entities, relying on five different identifiers of family-owned businesses.FindingsThe authors’ empirical testing indicates that the proposed free-float (il)liquidity ratios compare favorably with other volume-based methods, such as Amihud's ratio, liquidity ratio and turnover ratio. For the subsample of family organizations as a restricted-share setting, the authors report significant coefficients for our free-float measures across all the family firm identifiers used. In particular, as free-float decreases with progressive family influence, the advanced ratios capture an increase (decrease) in perceived liquidity (illiquidity) that is absent in the other benchmarks.Originality/valueThis study allows the authors to inform the ongoing debate on the management and governance of publicly listed companies with various impediments to trade. Traditional measures understate illiquidity (overstate liquidity) as the fraction of free trading shares is limited by design or circumstances. The authors’ proposed free-float metrics offer informational gains for family leaders to aid in their financing decisions and for non-family outsiders to guide their investment choice. As a constrained free float inhibits price discovery processes, the authors discuss how restricted stock issuers may alleviate the attendant negative effects on governance and information opacity.

Sustainable Human Resources as the Future of HRM Systems in Family Firms

2021 ◽  
pp. 145-165
Author(s):  
Aneta Kuźniarska
Keyword(s):  
Sustainable Development ◽  
Human Resources ◽  
Sustainable Management ◽  
Final Section ◽  
Family Firms ◽  
Future Generations ◽  
Ecological Problems ◽  
The Future ◽  
Distribution Of Resources ◽  
The Subject

Issues associated with the fair distribution of resources for both current and future generations are gaining on more importance as a result of broad discussion worldwide relating to the ecological problems. One of the significant elements of these activities is embodied by family firms; hence, the aim of this chapter is an attempt to indicate what an important role in terms of building the future of family firms is played by the adoption of the principles of sustainable management with the participation of the employees and the owners on the basis of the appropriately designed functions of HRM. The chapter includes introductory elements to the significance and foundations of the concept of sustainable development in order for the subsequent sections to contain information on the subject of utilizing the concept of sustainable management in organizations and the departments of HR. The final section of the chapter constitutes indications referring to the creation of sustainable personnel in family firms as a challenge that is facing the departments of HR.

A Typology of Family Firms: An Investigation of Entrepreneurial Orientation and Performance

2019 ◽  
Vol 32 (2) ◽  
pp. 174-194 ◽  
Author(s):  
Laura J. Stanley ◽  
Remedios Hernández-Linares ◽  
María Concepción López-Fernández ◽  
Franz W. Kellermanns
Keyword(s):  
Life Cycle ◽  
Entrepreneurial Orientation ◽  
Latent Profile Analysis ◽  
Family Firms ◽  
Firm Heterogeneity ◽  
Profile Analysis ◽  
Family Firm ◽  
Family Influence ◽  
Firm Life Cycle ◽  
And Performance

Drawing on family firm heterogeneity research, we develop a typology of family firms using differences in family influence and firm life cycle. We offer hypotheses regarding the relationships between the different firm types and two important outcomes: Entrepreneurial orientation (EO) and performance. Applying latent profile analysis to a sample of 684 Spanish and Portuguese family firms using variables related to family influence (i.e., ownership, family CEO) and firm life cycle (i.e., generational management, size, and presence of board of directors), we find four family firm types, which differentially affect EO and performance. Implications of our findings for EO, family firm performance, and the development of family firm typologies are discussed.

Socio-emotional wealth preservation and KPI voluntary disclosure quality

2020 ◽  
Vol 18 (3) ◽  
pp. 459-482
Author(s):  
Saoussen Boujelben ◽  
Chourouk Boujelben
Keyword(s):  
Voluntary Disclosure ◽  
Family Firms ◽  
Family Members ◽  
Family Influence ◽  
Disclosure Quality ◽  
Content Type ◽  
The Family ◽  
And Control ◽  
Practical Implications

Purpose The purpose of this paper is to examine the effect of the emotional attachment strength of family members to their business on the quality of the voluntary disclosure of their key performance indicator (KPI). More specifically, the authors focused on the effect of two dimensions of the socio-emotional theory, i.e. “family influence and control” and “firm dynasty succession.” Design/methodology/approach The authors performed a content analysis of annual reports for a sample of 87 French families listed in CAC All-Tradable to calculate a disclosure quality index of KPI. The authors proxied the “family influence and control” by the proportion of family members appointed in the board. To identify the “firm dynasty succession” concern, the authors classified firms according to the generation they belonged to. The authors estimated a cross-sectional linear regression model to meet the research objective. Findings This study confirms the role of the family affective attachment in decreasing the quality of KPI disclosure in such a way to preserve its socio-emotional wealth. The family firms’ principals who desire to sustain their control on the firm, to perpetuate the business for future generations and to protect their emotional wealth tend to avoid the disclosure of credible and reliable KPI information. Practical implications The findings have meaningful practical implications. First, they provide relevant insights into the regulatory bodies of the financial reporting regarding the increasing appeal for making KPI disclosure mandatory. Second, as the family businesses are the most widespread proprietorship in the French context, the effect of the family agenda on the quality of the KPI should be of interest to various policymakers and financial statements’ users of such firms. Third, the results inform nonfamily shareholders regarding the importance of selecting representatives on the board that should share similar interest with regard to KPI disclosure. Social implications From a societal perspective, this study is relevant in taking into account the critical role the family businesses have in the French economy. This study should help the minority shareholders to protect their interests and maximize their wealth within the family firm because it sheds light on the influence that family members have on hiding key information on the firm’s real performance. Originality/value To the best of the authors’ knowledge, no prior study in the family firms literature has examined the quality of voluntary disclosure of KPI. Although most previous studies merely compared family and nonfamily firms in terms of voluntary disclosure, the authors acknowledge and address the heterogeneity between family firms. The authors contribute to the few prior empirical validations of SEW implication on voluntary disclosure decisions by testing the effect of an additional dimension, which is family dynasty.

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