Do dissimilarities in the family involvement in family firms lead to different levels of indebtedness? Evidence from Spain

PurposeThis paper examines how differences in the family involvement in a family business can influence its level of indebtedness. Assuming the influence of family is not the same for all family firms, we consider each company as a combination of the family involvement in three dimensions of the business: ownership, management and governance structure.Design/methodology/approachUsing the partial least squares technique allows us to address the heterogeneity of family firms through an integral concept of family involvement in business that jointly considers the level of family participation in the ownership, management and governance structure of each firm.FindingsOur results demonstrate that the level of family involvement in a family firm, considering the heterogeneity existing within the family business group, directly influences its level of indebtedness. In addition, we find that family involvement in ownership and governance structures individually considered are positively related to the level of indebtedness of the family business.Originality/valueOur findings prove that some indebtedness patterns, which previous literature has described as common to all Spanish family businesses, may actually be valid only for specific family firms with a particular level of family involvement. In addition, the way of measuring family business heterogeneity through our integral concept of family involvement can be replicated by other authors because of the manageability of the items, thus contributing to an increased understanding of the effects of family involvement in firms' development.

Family Business Group Expansion Through IPOs: The Role of Internal Capital Markets in Financing Growth While Preserving Control

Using data from 44 countries, we document a new channel through which a family business group’s internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their initial public offering (IPO) market access. This IPO support role is particularly valuable when groups find capital-raising through seasoned equity offerings less attractive because of control-retention concerns and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a group’s expansion goals rather than its liquidation needs. This paper was accepted by Gustavo Manso, finance.

Family Business and Transaction Exposure

This study provides additional evidence and insight into theories on transaction exposure as it empirically examines the magnitude of transaction exposure in Kuwait, a developing country. Specifically, it investigates factors that might influence Kuwaiti firms’ responses to their transaction exposure and how being a family business or part of a family business group could play a mediating role in this response. Through conducting a questionnaire survey with the largest 147 industrial and commercial Kuwait firms, the results of a multinomial logistic regression indicate that theories on financial hedging seem to be inapplicable in the Kuwaiti case. However, these theories provide only partial explanations for management behavior in response to the transaction exposure of Kuwaiti companies. Findings show that a firm being part of a family business group is significantly correlated with its level of hedging, suggesting that firms that are members of a family group of businesses are expected to hedge at a higher level. This points to other theories, such as institutional theory, as playing greater roles in explaining the transaction exposure behaviors of firms in developing countries, and also suggests that family-controlled businesses are expected to engage in more innovative financial strategies and hedge at a higher level. The research findings imply that Kuwaiti firms need to be more aware of their transaction exposure and pay more attention to the related issues. Training programs in risk-management strategies should be provided to decision makers to help them evaluate the hedging strategies they employ. This study shows how different behaviors toward risk exist between firms that operate in developed and developing countries, including the effect of being part of a family business resulting in firms engaging in more innovative financial strategies when dealing with risk.

ANALYSIS OF FAMILY BUSINESS DEVELOPMENT MODEL BASED ON BUSINESS MODEL CANVAS (CASE STUDY IN CV. MXY)

Generator set (genset) is one of the solution on overcoming the problem of electricity in Indonesia. CV. MXY, which was established in 2009, is a genset spare parts distributor company headquartered in Jakarta. As a company that belongs to the middle-scale family business group, since its foundation CV. MXY has never had a concept of its business model. Amid the turbulent global economic situation, and the consequences of the Covid-19 pandemic. The company feel the need to make internal improvements in the organization. This was done in order to survive in a very competitive market. The purpose of this research is to identify and design a business model of CV. MXY based on the business model canvas and provides recommendation to companies, with due regard to the condition of family management. This research also to provide insight and alternative choices for family business that are trying to develop their business models. The research method used is a descriptive method based on case studies. Research was conducted in Jakarta in 2020 with data collection techniques carried out through interviews, field observations and library research. From the result of the research can be designed a business model CV. MXY based on business model canvas. In addition, the business model canvas is a simple and easy-to-understand solution as a first step in creating a business model.

Politically connected boards, family business groups and firm performance

Purpose The purpose of this paper is to examine the association between politically connected boards (both supervisory boards [SBs] and boards of directors [BODs]) and firm performance. Design/methodology/approach We focus on the political connections of SBs and BODs separately and estimate a quadratic model based on 1,099 Indonesian listed firm-year observations. Additionally, we address endogeneity problem by using sample selection model, generalized method of moments (GMM), propensity score matching\ and lagged variables regression. Findings We find that political connections of SBs are more significantly associated with firm performance than that of BODs. Furthermore, such an association is not monotonic, in that the relationship declines after a certain level of political connections. We also find that stand-alone firms with political connections perform better than firms belonging to family business groups. Our results are robust to alternative measures and to tests for endogeneity. Research limitations/implications This study contributes to the literature by proposing non-linear model to incorporate the rent-seeking and resource dependence arguments. Although previous studies use regression analysis (linear model) and find mixed results on the association between political connections and firm performance, our non-linear model extends our understanding of the relationship between political connections and firm performance. We extend corporate governance literature by examining the role of political supervisory boards in the dual board system and the role of family business group in Indonesia. Several limitations are addressed to interpret all the findings. We use one period of the presidency (SBY-Susilo Bambang Yudhoyono) in Indonesia as our sample, but other regimes are not considered. We collect political connection and family business group information based on publicly data available. For politically connected firms, we do not have information whether they obtain connections through ruling parties or not. Practical implications Practitioners (such as companies and policymakers) can use our models to consider the level of political connections that can improve corporate’s performance. Additionally, they can use our findings to design corporate governance policies. Originality/value The paper identifies the use of the non-linear model on the association between political connections and firm performance in Indonesian dual board system.

Analysis Of Family Business Group Succession: Comparative Case Study On Six Korean Chaebols

A chaebol is a Korean business group with a unique organizational structure in which both ownership and control rights held by a family. As their production accounts for nearly fifty percent of Korea’s GDP and their power in the labor market, it is important to analyze the succession of chaebols, which is closely related to the sustainability of the business. This paper analyzes the six Korean chaebols’ successions to increase our understanding of the processes and outcomes of the family succession. Specifically, we employ the three-circle model, i.e., the ownership, family, and business system, to conduct a comparative case study. Our analysis suggests that succession that involves a large size of succession concentrated to only one successor and restructuring of business portfolio experiences higher post- performance. Also, the level of conflicts in the succession process was not found to have an effect on performance. Overall, our findings imply that the succession is a period available to the company to set a right course of actions for improving competitiveness.