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

Abstract

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, results suggest that legal context and national culture influence the performance 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 firm valuation. Practitioner/Policy 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.

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