Revisiting Family Firms

Abstract

I propose a novel measure to identify family firms based on the number of family links between high-ranking co-workers. Leveraging this measure, I reexamine previous findings in the literature and derive four novel facts: (i) Measures of stock ownership misclassify firms with a large family presence. (ii) Family-run firms exhibit value stock characteristics, whereas founder-CEO firms display growth stock characteristics. (iii) Family-run firms pay lower costs. (iv) Family managers behave myopically. I conclude that failing to consider family links can lead to highly misleading results in the study of family firms.

Keywords: Family firms, family ties, stock ownership, firm profitability

JEL Classification: G32, J24