Are Family Firms Better Performers During the Financial Crisis? New Insights from the S&P 500 Firms

Abstract

This paper provides new evidence examining whether family firms were better performers during the global financial crisis (2008-2010). Using the dataset of the S&P 500 non-financial firms during the period of 2006-2010, we find that family firms outperform non-family firms during the crisis. Moreover, it is the sub-group of family firms, founder firms, i.e. those where the founder is present that contributes to the outperformance. We also find that during the global financial crisis, founder firms invest significantly less and have better access to the credit market than non-family firms. Our analysis suggests that the superior performance of founder firms is largely caused by less incentive to over-invest in order to boost short-term earnings during the crisis.

Keywords: family firms, performance, founder, corporate governance, financial crisis

JEL Classification: G01, G14, G32