Weathering the Storm: Family Ownership, Governance, and Performance Through the Financial and Economic Crisis

17 Pages Posted: 11 Nov 2016

See all articles by Alessandro Minichilli

Alessandro Minichilli

Bocconi University - Department of Management and Technology

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati

Andrea Calabrò

Witten Institute for Family Business - Witten/Herdecke University

Date Written: November 2016

Abstract

Manuscript Type. Empirical.

Research Question/Issue. Considering the recent financial and economic crisis as a unique exogenous shock, our study investigates the financial performance of family‐controlled firms in “steady‐state” conditions as opposed to situations of severe economic distress. In addition, we focus our attention within family firms in order to tease out the leadership (family or non‐family CEO) and family ownership (family ownership concentration or dispersion) conditions that allow some governance arrangements to perform better than others during an economic downturn.

Research Findings/Insights. Examining the entire population of Italian industrial family and non‐family publicly listed companies over the period 2002–2012, we observe a significantly and consistently better performance of family‐controlled firms during the financial and economic crisis, a finding that proves to be robust to several analytical specifications, as well as to different performance measures (ROA, ROE). Then, focusing on family firms only, we find that mixed configurations (family CEOs with relatively lower family ownership concentration) produce better performance in the face of an external hazard.

Theoretical/Academic Implications. Our study confirms the pivotal assumption of the socioemotional wealth perspective that the advantages of family firms show up exactly when ownership is at stake. Our results also add to the growing literature on the resilience of family firms, showing that they are more able than others to absorb exogenous shocks.

Practitioner/Policy Implications. Our findings suggest the importance of crafting governance structures well in advance of a crisis. Our research speaks to policymakers, indicating the importance of family firms for national economies, and the political opportunity to sustain their growth and managerial development.

Keywords: Corporate Governance, Family Firms, Financial Crisis, Ownership, Leadership

Suggested Citation

Minichilli, Alessandro and Brogi, Marina and Calabrò, Andrea, Weathering the Storm: Family Ownership, Governance, and Performance Through the Financial and Economic Crisis (November 2016). Corporate Governance: An International Review, Vol. 24, Issue 6, pp. 552-568, 2016, Available at SSRN: https://ssrn.com/abstract=2867682 or http://dx.doi.org/10.1111/corg.12125

Alessandro Minichilli (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati ( email )

Rome
Italy

Andrea Calabrò

Witten Institute for Family Business - Witten/Herdecke University ( email )

Alfred-Herrausen-Straße 50
Witten, DE Dortmund 58448
Germany

HOME PAGE: http://www.uni-wh.de/universitaet/personenverzeichnis/details/show/Employee/calabro/

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