Do Family Firms Outperform Nonfamily Firms: Case of a Developing Country
Author(s)
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Abstract
The study investigates the association between family business and the performance of the firms. To underscore this relationship, the case of nonfinancial companies is analysed between 2012 and 2017. The generalised method of moments (GMM) is employed as the econometric method that effectively controls all categories of endogeneity. The study finds that family firms outperform their nonfamily counterparts in terms of firm performance. The result is positively significant for both the financial performance measure, ROA, and the market measure, Tobin’s Q. The outcome of this research suggests that policymakers should initiate the necessary governance mechanisms to control the actions of the family firms that might jeopardise the interests of the minority shareholders.
Keywords
Family firms, firm performance, GMM, ROA, Tobin’s Q, developing country
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