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Family Firms, Employee Satisfaction, and Corporate Performance

52 Pages Posted: 18 Aug 2014 Last revised: 31 Aug 2015

Minjie Huang

University of Louisville - Department of Finance

Pingshu Li

University of Kansas - School of Business

Felix Meschke

University of Kansas - Finance Area

James P. Guthrie

University of Kansas - School of Business

Date Written: July 15, 2015

Abstract

Prior research shows that family control affects firm value through capital investment, debt financing, M&A activities, and governance structure. This study investigates the role of corporate culture in family firms and its implications for firm value. We use more than 100,000 surveys collected by Glassdoor between 2008 and 2012 that capture how employees perceive their company’s culture. We find that employees who work for firms with active founders rate their companies higher than employees in nonfamily firms, especially if the founder runs the company. In contrast, employee satisfaction in scion firms does not differ from nonfamily firms, and when scions run the company, employees are less satisfied. Scion firms also exhibit significant lower employee satisfaction during the recent financial crisis. Furthermore, employee assessments predict subsequent firm performance measured by Tobin's q and return on assets (ROA). Our findings provide evidence that family firms exhibit a human-capital-enhancing culture that improves firm performance.

Keywords: Family firms, Corporate culture, Employee satisfaction, Human capital, Firm performance

JEL Classification: G3, G32, J28, M14

Suggested Citation

Huang, Minjie and Li, Pingshu and Meschke, Felix and Guthrie, James P., Family Firms, Employee Satisfaction, and Corporate Performance (July 15, 2015). Journal of Corporate Finance 34 (2015) 108-127. Available at SSRN: https://ssrn.com/abstract=2482003

Minjie Huang

University of Louisville - Department of Finance ( email )

College of Business
Harry Frazier Hall
Louisville, KY 40292
United States

Pingshu Li

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

Felix Meschke (Contact Author)

University of Kansas - Finance Area ( email )

Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States
(347) 433-5495 (Phone)

HOME PAGE: http://www.business.ku.edu/faculty/meschke-felix/

James P. Guthrie

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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