A selection of interesting research and articles we found recently.

What do private family firms do about paying out dividends?
Sigrid Vandemaele and Mark Vancauteren applied behavioral economics to explain dividend policy in private family firms. Based on a sample of 501 Belgian firms, their results indicate that dividend payout is low when a family chief executive officer (CEO) leads the business and in the presence of a family-dominated board. The tendency of a family CEO or family-dominated board to retain earnings appears to be stronger in earlier generational stages compared with later generational stages.

The findings are consistent with (1) socioemotional objectives being important drivers of funding decisions in private firms where families possess important decision and control power and (2) these objectives being more predominant in early generational stages.

Read the full article online for free: Sigrid Vandemaele and Mark Vancauteren. 2015. Nonfinancial Goals, Governance, and Dividend Payout in Private Family Firms.
Journal of Small Business Management, 53(1), 166–182.


Is the family an “asset” or “liability” for firm performance?
Francesco Chirico and Massimo Bau examined the dynamics that regulate the family as either an asset or liability for the firm. They showed that the percentage of family members on the top management team (TMT) has an inverted U-shaped relationship with firm performance. However, when environmental dynamism is low, this curvilinear relationship becomes steeper.When environmental dynamism is high, an increased percentage of family members on the TMT enhances firm performance.

More information in: Francesco Chirico and Massimo Bau. 2014. Is the Family an “Asset” or “Liability” for Firm Performance? The Moderating Role of Environmental Dynamism.
Journal of Small Business Management, Special Issue: Family Firms, Entrepreneurship, and Economic Development. 52(2), 210–225.


Can family owned firms be both socially responsible and socially irresponsible?
Yes, according to Joern Block and Marcus Wagner who investigated the effect of family ownership on various dimensions of CSR (corporate social responsibility). The researchers argue that CSR is a multidimensional concept that encompasses diverse aspects like employee relations, ecological concerns and product issues, and that therefore the effect of family ownership is likely to differ across the various CSR dimensions. In other words, family firms can be responsible and irresponsible at the same time in relation to CSR depending on the aspect being considered.

Using a dataset of large US firms the authors show that family ownership is negatively linked to community-related CSR performance and positively associated with diversity-, employee-, environment- and product-related aspects of CSR. Interestingly, product-related aspects of CSR are associated with the largest positive effect of family ownership on CSR performance.

For more details, read: Joern H. Block and Marcus Wagner. 2014. The Effect of Family Ownership on Different Dimensions of Corporate Social Responsibility: Evidence from Large US Firms.
Business Strategy and the Environment, 23(7), 475–492.


Do family firms perform better financially with diversity management?
Manisha Singal and Virginia Gerde concluded that they do after examining the role of diversity management policies in the financial performance of family firms. Using a longitudinal data set covering 952 publicly-listed firms and multidimensional measures for diversity and financial performance, the results show that family firms underperform nonfamily firms on diversity performance indicators. However, intriguingly, the weaker diversity management practices of family firms may contribute to their robust financial performance.

The full article is at: Manisha Singal and Virginia W. Gerde. 2015. Is Diversity Management Related to Financial Performance in Family Firms?
Family Business Review, January 14, doi 0894486514566012.


Does family ownership encourage internationalization?
Family ownership has been recognized as an important determinant of corporate strategic choices; however, little research investigates the effects of family ownership and corporate governance on internationalization in small and medium-sized enterprises (SMEs). Hsiang-Lan Chen, Wen-Tsung Hsu and Chiao-Yi Chang used agency theory and the resource-based view of the firm to analyze the relationships between family ownership, institutional ownership and internationalization. Using a sample of Taiwanese SMEs, the finding of a positive family ownership–internationalization relationship suggests that family ownership may encourage internationalization.

The interaction of family ownership and institutional ownership is positively related to internationalization, suggesting that SMEs with high family ownership are more likely to internationalize as institutional ownership increases.

More details are available at: Hsiang-Lan Chen, Wen-Tsung Hsu and Chiao-Yi Chang. 2014. Family Ownership, Institutional Ownership, and Internationalization of SMEs.
Journal of Small Business Management, Special Issue: Understanding Entrepreneurship: Challenging Dominant Perspectives and Theorising Entrepreneurship through New Post-Positivist Epistemologies. 52(4), 771–789.


Family involvement and firm performance in UK listed firms
Panikkos Poutsiouris, Christos S. Savva and Elias Hadjielias examined how family involvement affected the performance of UK companies listed on the London Stock Exchange (LSE) between 1998 and 2008. Econometric models evaluated the effect of family involvement in terms of ownership and management on firm performance (measured with accounting ratios and Tobin’s Q) while controlling for a number of conditions external to the firm and business characteristics.

Findings illustrate a non-linear relationship between family ownership and firm performance, with performance increasing until family shareholding reaches 31%, after which performance begins to decrease. Moreover, the findings illustrate that the higher the involvement of the family in terms of management (i.e., through a family CEO) and governance (board representation and/or CEO-Chairman dual role), the higher the performance the firm appears to sustain over the long run and across generations.

Read the full article online for free: Panikkos Poutsiouris, Christos S. Savva and Elias Hadjielias. 2015. Family involvement and firm performance: Evidence from UK listed firms.
Journal of Family Business Strategy  6(1), 14–32.