Family Firms and Financial Performance: The Cost of Growing

Abstract

This study examines the relationship between financial performance and family involvement for 523 listed and non-listed Colombian firms from 1996-2006. Using a detailed database and performing several panel data regression models, we have found that family firms exhibit better financial performance on average than non-family firms when the founder is still involved in operations, although this effect decreases with firm size. With heirs in charge, there is no statistical difference in financial performance. Both direct and indirect owner-ship (control through pyramidal ownership structures within family business groups) affect a firm's financial performance positively. However, this positive effect decreases with firm size, and some kinds of family involvement appear to make firm growth expensive.

Este estudio examina la relación entre el desempeño financiero y el involucramiento familiar para una muestra de 523 firmas durante el período de 1996 a 2006. Los modelos de regresión estimados con esta esta base de datos, muestran que las firmas familiares tienen un mejor desempeño que las no familiares cuando el fundador gerencia la empresa. La estructura de propiedad corporativa afecta el desempeño en especial cuando el control se ejerce a través de grupos piramidales. Sin embargo, el efecto positivo del involucramiento familiar decrece con el tamaño de la firma y al parecer éste se convierte en un costo para el crecimiento corporativo.