The Resilient Family Firm: Stakeholder Outcomes and Institutional Effects

17 Pages Posted: 29 Apr 2015

See all articles by Marc van Essen

Marc van Essen

University of South Carolina - Darla Moore School of Business; University of South Carolina - Darla Moore School of Business

Vanessa Strike

University of British Columbia (UBC) - Sauder School of Business

Michael Carney

Concordia University, Quebec - John Molson School of Business

Stephen G. Sapp

University of Western Ontario - Richard Ivey School of Business

Date Written: May 2015

Abstract

Manuscript Type. Empirical.

Research Question/Issue. Our study seeks to explain the relationship between publicly listed family‐controlled firms (FCFs) and investor and employee outcomes before and during the global financial crisis. Theoretically, we develop hypotheses suggesting that FCF resilience is beneficial to both investor and employees. Employing a large firm‐level data set of 2,949 firms across 27 European countries, we test the hypotheses that FCFs' long‐term orientation makes them resilient to the effects of economic shocks. In addition, using hierarchical linear modeling we evaluate family firm investor and employee outcomes, and the moderating impact of legal institutions protecting minority investors and employees.

Research Findings/Insights. We find that FCFs financially outperform non‐FCFs during the financial crisis, beginning in 2007 and reaching its lowest point in 2009, but show no significant differences during the stable‐growth period between 2004 and 2006. We evaluate two employee outcomes: downsizing and wage decreases. We find that FCFs are less likely to downsize their workforce or cut wages in both pre‐crisis and crisis conditions. Based upon hypotheses founded in the comparative capitalisms logic, we find significant institutional effects that are contrary to our predictions. Our findings suggest that investors and employees of FCFs achieve more favorable outcomes for their interests when the rules pertaining to investor protection and their enforcement are poorly developed.

Theoretical/Academic Implications. We contribute to the emerging literature on the institution‐based view of comparative corporate governance by demonstrating that family‐controlled firms' stakeholder outcomes are contingent upon legal protection for employees and investors under contrasting economic circumstances.

Practitioner/Policy Implications. Family owners, employees and minority investors should consider both firm‐level and country‐level governance institutions when investing in different countries, especially in times of economic crisis as jurisdiction‐level institutions and firm ownership choices produce variable outcomes for different stakeholders in both crisis and non‐crisis conditions.

Keywords: Corporate Governance, Family‐Controlled Firms, Financial Crisis, Stakeholder Outcomes, Resilience

Suggested Citation

Essen, Marc van and Essen, Marc van and Strike, Vanessa and Carney, Michael and Sapp, Stephen G., The Resilient Family Firm: Stakeholder Outcomes and Institutional Effects (May 2015). Corporate Governance: An International Review, Vol. 23, Issue 3, pp. 167-183, 2015, Available at SSRN: https://ssrn.com/abstract=2600268 or http://dx.doi.org/10.1111/corg.12087

Marc van Essen (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

Vanessa Strike

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Michael Carney

Concordia University, Quebec - John Molson School of Business ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada

Stephen G. Sapp

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada
519-661-3006 (Phone)
519-661-3959 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
672
PlumX Metrics