Family Matters?: A Cross‐National Analysis of the Performance Implications of Family Ownership

• Published date: 01 November 2016
• Author: Jean McGuire,Sandra Dow
• DOI: http://doi.org/10.1111/corg.12155
• Date: 01 November 2016

Family Matters?: A Cross-National Analysis of the

Performance Implications of Family Ownership

Sandra Dow*and Jean McGuire

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: This study makes use of a large multi-country sample to examine how the market performance of

family f‌irms is affected by national context.

Research Findings/Insights: We f‌ind that Tobin’s Q among family f‌irms is signif‌icantly lower than that of non-family f‌irms

across 33 countries. In examining these effects, resultssuggest that legal context andnational culture inf‌luence theperformance

implications of publicly traded family f‌irms, serving to mitigate some of the generally negative impact.

Theoretical/Academic Implications: We f‌ind that national context is an important contingency in determining the family’s

ability and willingness to exploit minority shareholder wealth. Building upon our results, future research can focus on how

formal and informal institutions may be substitutes for each other. Our results help explain why prior empirical research

provides conf‌licting results regarding the impact of family governance on f‌irmvaluation.

Practitioner/Pol icy Implications: Our f‌indings suggest that the performance implications of family f‌irms are contingent on

legal protections, belief in the impartiality of the legal system, and culture. Given wide variations in these measures across

countries, the appropriate mechanisms to strengthen investor protection will not follow a one-size f‌its all approach.

Keywords: Corporate Governance, Family Ownership, National Culture, Agency Theory, Minority Shareholders

INTRODUCTION

Family ownership is probably the most pervasive owner-

ship structure found in many national contexts (Barontini

& Caprio, 2006;La Porta, Lopez-de-Silanes,Shleifer, & Vishny,

1998), including Europe (Faccio, Marchica, & Mura, 2012;

Maury, 2006), South America (Silva & Majluf, 2008), and Asia

(Lin & Chang, 2010; Jiang & Peng, 2011; Yoshikawa &

Rasheed, 2010). For example, approximately 70 percent of

Indian and Brazilian f‌irms are family controlled (Bhaumik &

Gregoriou, 2010), and family f‌irms are dominant in both

France and Italy (Bhaumik & Gregoriou, 2010). Even in the

United States and Canada, where a more diffuse ownership

structure is thought to prevail, we commonly f‌ind family

ownership in large publicly traded f‌irms (Anderson & Reeb,

2003; Ben-Amar & Andre, 2006; Lee, 2006).

Such prevalence of family ownership has fostered consider-

able debate regarding the competitiveness of family f‌irmsin a

global economy, and indeedtheir role in promoting economic

growth. However, evidence regarding theperformance impli-

cations of family ownership is mixed. Some studies f‌ind fam-

ily ownershippositively impacts f‌irm performance (Anderson

& Reeb, 2003;Barontini & Caprio, 2006; Hamadi,2010; Maury,

2006; Singal & Singal, 2011). Other studies conclude that

family ownership coincides with poorer f‌irm performance

(Bennedsen & Nielsen, 2010; Claessens, Djankov & Lang,

2000; Thomsen & Pedersen, 2000). Still more studies detect

no signif‌icant relationship between family ownership and

f‌irm performance (Aguilera & Crespi-Cladera, 2012; Jiang &

Peng, 2011; Sacristán-Navarro, Gómez-Ansón, & Cabeza-

García, 2011). However, many of these studies focus on a

single country or region (Claessens, Djankov, & Lang, 2000;

Singal & Singal, 2011). Although facilitating collection of

detailed f‌irm-level data, country- or regional-level studies do

not allow comprehensive examination of the generalizability

of f‌indings over different national contexts and of national or

regional moderating effects.

There are a number of reasons for these disparate empirical

f‌indings, including differences in the measurement of family

ownership, generational effects, and the performance mea-

sures used (Heugens, van Essen, & van Oosterhout, 2009;

Villalonga & Amit, 2010). Further, the costs and benef‌its of

family control may vary with industry characteristics or f‌irm

strategy (Villalonga & Amit, 2010). National context has been

identif‌ied as critical to understanding the performance impli-

cations of family ownership (Heugens et al., 2009; Peng &

Jiang, 2010). The “law and f‌inance”arguments proposed by

La Porta and colleagues (e.g. La Porta et al., 1998) often dom-

inate the researchfocus in cross-nationalstudies. However,we

agree with Aguileraand Williams (2009) that this perspective,

*Addressfor correspondence:Sandra Dow,GSIPM, MiddleburyInstitute of International

Studies at Monterey, 460 Pierce St., Monterey, CA 93940,USA. Tel: 8316474187;E-mail:

smdow@miis.edu

© 2016 JohnWiley & Sons Ltd

doi:10.1111/corg.12155

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Corporate Governance: An International Review, 2016, 24(6): 584–598