The Performance of Italian Family Firms
Bocconi University - Department of Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)
Carlo A. Favero
Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)
Stefano W. Giglio
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Università Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)
ECGI - Finance Working Paper No. 127/2006
In this paper, we study the performance of Italian listed family firms in the period 1998-2003. We measure their performance by using both accounting and market data. We first study the relative performance of family firms compared to widely held firms. Then we investigate whether performance is affected by the type of family firm (i.e., whether the CEO is a member of the family or is an outsider). We find that the data and the methodology used to measure performance strongly affect the results. When performance is measured by accounting data (ROA), using a static model, we find evidence in favor of a superior performance of family firms. Such evidence is not confirmed by the application of the same model to market measures of performance. However, we report statistical evidence that the correct econometric specification for market data is a dynamic model. The results of estimation of the dynamic model for the market measures of performance are more consistent with those based on the static model for the accounting measures of performance.
Number of Pages in PDF File: 34
Keywords: Family firms, corporate performance, management style
JEL Classification: G32
Date posted: July 21, 2006
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