Family Firms, Family Generation and Performance: Evidence from an Emerging Economy

Abstract

Purpose: The objective of this study is to examine the impact of family ownership on firm performance. In particular we investigate whether family firms outperform non-family firms and whether first generation family firms perform better than second generation family firms in an emerging economy using Bangladesh as a case.

Methodology/Approach: This study uses a dataset of 141 listed Bangladeshi non-financial companies for the period 2005 to 2009. The methodology is based on multivariate regression analysis.

Findings: Our result shows that family firms perform better than their non-family counterparts. We also find that family ownership has a positive effect on firm performance. Our analysis further reveals intergenerational differences where family firms and performance are associated positively when founder members act as CEOs or chairmen. However, when descendents serve as CEOs or chairmen family firms are associated with poorer firm performance.

Originality/Value: We extend the findings of previous studies that investigate the family ownership and firm performance relationship in developed economy settings, but neglected emerging economies. Our study also informs the literature about the intergenerational impact of family firms on performance in an emerging market.

Keywords: family ownership, family firms, firm performance, Bangladesh