Family business and value-added distribution: a socioemotional wealth approach

José Luis Gallizo Larraz · Cecilio Mar Molinero · Jordi Moreno Gené · Manuel Salvador

26 citations0/0 files storedAcademia Revista Latinoamericana de Administración

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Family Business Performance and Succession Corporate Finance and Governance Financial Reporting and Valuation Research

Abstract

Purpose Research has demonstrated that family businesses limit the goal of maximizing profits in exchange for maintaining control of the company and passing control to future generations. However, these decisions are not always shared by the stakeholders who are outside the family context, making tensions arise within the company that may affect profitability and the share prices of the family business. The purpose of this paper is to analyse the internal tensions in family businesses in the value-added (VA) distribution, and whether these tensions harm their performance as a result of the restrictions under which these companies operate. Design/methodology/approach A factor analysis has been used to measure the tension that results from VA distribution of a sample of 105 Spanish listed firms for the 2005-2012 period. A regression analysis has been used to study the impact of this tension on their share prices. Findings Results show that being a family business has a positive effect on the business tension factor and that returns and share prices are inversely related to tension factors. Thus, the authors conclude that the decision to maintain control over the family business threatens profitability and share prices. Social implications An analysis of distribution of VA in family businesses sheds light on whether or not the management in its decisions preserves its socioemotional wealth (SEW) generating tensions among its economic agents, affecting its profitability and continuity. This knowledge is important for company stakeholders and future investors. Originality/value This is the first study in which the value-added statement is used to analyse how the management style of firms, and especially family businesses, are seeking to preserve their SEW and internal tensions generated by them.

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References

1983Separation of Ownership and Control 2007Socioemotional Wealth and Business Risks in Family-controlled Firms: Evidence from Spanish Olive Oil Mills 1999Defining the Family Business by Behavior 2012Socioemotional Wealth in Family Firms 2001Agency Relationships in Family Firms: Theory and Evidence 2003Founding family ownership and the agency cost of debt 2003A unified systems perspective of family firm performance 2002The F-PEC Scale of Family Influence: A Proposal for Solving the Family Business Definition Problem1

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