FOUNDER INFLUENCE IN FAMILY BUSINESSES: A MULTINATIONAL CORRELATIONAL ANALYSIS (original) (raw)
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Small and medium sized businesses are the engines that drive economic development and contribute significantly to the Gross Domestic Products (GDP) of most countries. The roots of such businesses are the families that form their foundations. To succeed, family business founders must establish strong foundations, structures and succession plans. This paper examined the role of African and Indian business founders in determining the future of their businesses across generations. The study targeted 52 business founders (owners) and managers operating Mombasa City (Kenya) and used stratified random sampling method to identify the respondents. A questionnaire was used as the primary data collection instrument while a documentary analysis was performed to attain secondary data. The paper found that family businesses are predominant among all respondents. It was also found that most Indian families involve family members in business during strategic development and planning. In terms of lo...
TO REAP OR TO SOW? GOVERNANCE, STRATEGY AND PERFORMANCE IN FAMILY VERSUS FOUNDER BUSINESSES
2007
Corporate governance can have a profound impact on business conduct and performance. It may influence whether a business will be managed to sow value for all shareholders or to reap utility for only some. We argue that certain types of family businesses are especially prone to utility maximizing because many family owners divide their loyalties between the business and their family. This may result in harvest strategies and modest growth and returns. By contrast, businesses closely held by lone or unrelated founders are unencumbered by family distractions.
Family-Ownership, or Founder-CEO, Does it Matter, For the Firm Performance?
CENTRAL ASIAN JOURNAL OF INNOVATIONS ON TOURISM MANAGEMENT AND FINANCE, 2022
The debate on whether a founder should be or should remain as a CEO is one that has attracted various authors. One stride of literature emphasise the effect of founder-CEO on the firm performance (McConaughty, et al. 1998). Such literature argue that the founder has an ‘emotional’ connection with the business they started and are keen on the future sustainability of the business. On the other hand, those who argue that the founder should relinquish some control of the firm hold that an external CEO could perform better than the founder. Other literature have concentrated on the family ownership and its effect on firm performance while other distinguish a lone founder firm and family firms with multiple relatives (Miller, et al., 2007). In this research, we investigate whether family ownership has greater influence than founder-CEO on firm performance. The questions raised in this short paper are, does it matter whether it is family-ownership or founder-CEO in relation to firm performance. Do family firms perform better than non-family firms? Does a founder-CEO bring better firm performance?
Entrepreneurial Management and Governance in Family Firms (Special Issue)
2004
Many organizations, ranging from small entrepreneurial start-ups to large, multi-business and multinational enterprises, exhibit a family dimension. Although there is much evidence that this familial dimension is pervasive in organizing economic activities, it remains understudied. The articles in this special issue further our understanding of family businesses and how they might be usefully managed and organized at operational and policy levels. They examine important topics-management succession, agency costs in family versus non-family firms, the effects of culture, and family elites in rent-seeking societies-and improve our understanding of the role of family in entrepreneurial wealth creation at both firm and societal levels. Importantly, these papers further our understanding of the contingencies and contexts wherein family based approaches to organizing enterprise might yield advantages or disadvantages.
Founding family controlled firms: Performance, risk, and value
Journal of Small …, 2001
An agency theory framework is used to test the effects of founding family control on firm performance, capital structure, and value. Both the finance and management literatures regarding the relationship between firm control and firm value are explored. Controlling for size, industry, and managerial ownership, the results suggest that firms controlled by the founding family have greater value, are operated more efficiently, and carry less debt than other firms.
The influence of the CEO in listed family businesses
Intangible Capital, 2019
Purpose: Our objective is to analyze the influence that the type of CEO has on the management of listed family businesses in Spain, distinguishing between whether the CEO is a family member or not. The study mainly focuses on his/her influence on levels of profitability. Design/methodology: During de period from, 2012 to 2016, with data coming from Iberian Balance Sheet Analysis System (SABI) database. To analyze the effects of the CEOs on family businesses, we carried out two kinds of analyses. First, a univariate analysis that allowed us to identify differences regarding profitability, financial structure, growth, and dividend payout policies, and secondly, a linear regression model to see the influence-as well as the effect and significance-that variables, including the type CEO, had on profitability. Findings: Our results show the existence of a double effect on the profitability of family businesses of having an outside CEO. First, there is a statistically significant negative effect that is derived from the non-family CEOs' increased propensity to take on debt, and secondly, there is a positive causal effect on businesses' profitability that has to do with the different management styles that outside CEOs bring to the table, as they are more focused on profits. The results support the importance of having non-family CEOs in listed family businesses in Spain. Research limitations/implications: Our study focused on family businesses listed on the Spanish stock market, which means that the number of companies that were analyzed was reduced and the results cannot be extended to other kinds of businesses. However, this fact did enable us to get more high-quality data and focus on a specific field that was appropriate for considering the problem we proposed. Originality/value: While many studies have compared the performance of family businesses with that of non-family businesses, few have considered that family businesses are not homogeneous and that they have different management styles. And, These styles are determined by the type of CEO that is leading the company; this fact is analyzed empirically in this article.
Entrepreneurial Management and Governance in Family Firms: An Introduction
Entrepreneurship Theory and Practice, 2004
Many organizations, ranging from small entrepreneurial start-ups to large, multi-business and multi-national enterprises, exhibit a family dimension. Although there is much evidence that this familial dimension is pervasive in organizing economic activities, it remains understudied. The articles in this special issue further our understanding of family businesses and how they might be usefully managed and organized at operational and policy levels. They examine important topics-management succession, agency costs in family versus non-family firms, the effects of culture, and family elites in rent-seeking societies-and improve our understanding of the role of family in entrepreneurial wealth creation at both firm and societal levels. Importantly, these papers further our understanding of the contingencies and contexts wherein family based approaches to organizing enterprise might yield advantages or disadvantages.
Founding family leadership and industry profitability
Small Business Economics, 2009
In this article, we argue that firms in highmargin industries can benefit from founding family influence. Specifically, in more profitable markets, the influence of the founding family provides an additional corporate governance-monitoring function. The sample consists of 294 firm-year observations from 98 publicly traded companies headquartered in Sweden, representing approximately half of all nonfinancial traded firms. Our support that the effect of family leadership in publicly held firms should be assessed in relation to the intensity of industry competition.
Founding family controlled firms: Efficiency and value
Review of Financial Economics, 1998
We examine the efficiency and value of founding family controlled firms (FFCFs), firms whose CEOs are either the founder or a descendant of the founder. We find that FFCFs are more efficient and valuable than non-FFCFs that are similar with respect to industry, size, and managerial ownership. We also observe that descendant-controlled firms are more efficient than founder-controlled firms. Finally, we show that younger founder-controlled firms are more efficient than older ones. These results are robust after controlling for the age of the firm and a variety of investment opportunity measures. Our results are consistent with the notions that managerial ownership is endogenous to the firm and that family relationships improve monitoring while providing incentives that are associated with better firm performance. Public, founding family-controlled firms (FFCFs) represent an organizational form between the diffusely owned, manager-controlled firm and the closely-held private ftrm. The unique relationship between the founding-family CEO and the firm holds the potential for improved monitoring and top managerial incentives. This study examines the operating efficiency and the relative value of such firms.
Founder centrality and strategic behavior in the family-owned firm
… Theory and Practice, 2000
Founder Centrality and Strategic Behavior in the Family-Owned Firm. by Louise M. Kelly , Nicholas Athanassiou , William F. Crittenden This paper explores how founders influence strategic management in the family business. The authors suggest it.