This study examines how firm performance is impacted by family ownership and governance in an emerging market. Employing a panel data set of listed companies from National Stock Exchange (NSE) of India for the period 2011–2017, this study analyses the relationship between family ownership and firm performance while controlling for variables like impact of external environment and characteristics of firms. The performance of firms is measured by accounting measures of performance and Tobin’s Q. The findings of this study suggest that family ownership and firm performance have a nonlinear relationship and family ownership has a positive impact on firm performance till a certain point and after that it starts affecting firm performance negatively. This study also finds that family involvement in governance positively affects the firm performance.
AndersonR. C.ReebD. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance, 58(3), 1301–1328.
2.
AndresC. (2008). Large shareholders and firm performance—an empirical examination of founding-family ownership. Journal of Corporate Finance, 14(4), 431–445.
3.
AroraA.BodhanwalaS. (2018). Relationship between corporate governance index and firm performance: Indian evidence. Global Business Review, 19(3), 675–689.
4.
BarontiniR.CaprioL. (2006). The effect of family control on firm value and performance: Evidence from continental Europe. European Financial Management, 12(5), 689–723.
5.
BhatiaS.SrivastavaA. (2017). Do promoter holding and firm performance exhibit endogenous relationship? An analysis from emerging market of India. Management and Labour Studies, 42(2), 107–119.
6.
BjuggrenP. O.PalmbergJ. (2010). The impact of vote differentiation on investment performance in listed family firms. Family Business Review, 23(4), 327–340.
7.
BlockJ. H.JaskiewiczP.MillerD. (2011). Ownership versus management effects on performance in family and founder companies: A Bayesian reconciliation. Journal of Family Business Strategy, 2(4), 232–245.
8.
BraunM.SharmaA. (2007). Should the CEO also be chair of the board? An empirical examination of family-controlled public firms. Family Business Review, 20(2), 111–126.
9.
CaiD.LuoJ. H.WanD. F. (2012). Family CEOs: Do they benefit firm performance in China? Asia Pacific Journal of Management, 29(4), 923–947.
10.
ChuW. (2011). Family ownership and firm performance: Influence of family management, family control, and firm size. Asia Pacific Journal of Management, 28(4), 833–851.
11.
ClaessensS.DjankovS.LangL. H. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58(1–2), 81–112.
12.
ClaessensS.YurtogluB. B. (2013). Corporate governance in emerging markets: A survey. Emerging markets review, 15, 1–33.
13.
CorbettaG.SalvatoC. (2004). Self-serving or self-actualizing? Models of man and agency costs in different types of family firms: A commentary on ‘comparing the agency costs of family and non-family firms: Conceptual issues and exploratory evidence’. Entrepreneurship Theory and Practice, 28(4), 355–362.
14.
DailyC. M.DollingerM. J. (1992). An empirical examination of ownership structure in family and professionally managed firms. Family business review, 5(2), 117-136.
15.
DavisJ. H.SchoormanF. D.DonaldsonL. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20–47.
16.
DeAngeloH.DeAngeloL. (2000). Controlling stockholders and the disciplinary role of corporate payout policy: A study of the times mirror company. Journal of Financial Economics, 56(2), 153–207.
17.
DemsetzH.LehnK. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155–1177.
18.
DharmadasaP. (2014). Family ownership and firm performance: Further evidence from Sri Lanka and Japan. International Journal of Asian Business and Information Management (IJABIM), 5(4), 34–47.
19.
DonaldsonL.DavisJ. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16(1), 49–64.
20.
DyerW. G. (2006). Examining the family effect on firm performance. Family Business Review, 19(4), 253–273.
21.
EddlestonK. A.KellermannsF. W. (2007). Destructive and productive family relationships: A stewardship theory perspective. Journal of Business Venturing, 22(4), 545–565.
22.
FamaE. F.JensenM. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301–325.
23.
FaccioM.LangL. H. (2002). The ultimate ownership of western European corporations. Journal of Financial Economics, 65(3), 365–395.
24.
FilatotchevI.LienY. C.PiesseJ. (2005). Corporate governance and performance in publicly listed, family-controlled firms: Evidence from Taiwan. Asia Pacific Journal of Management, 22(3), 257–283.
25.
García-RamosR.García-OlallaM. (2011). Board characteristics and firm performance in public founder-and nonfounder-led family businesses. Journal of Family Business Strategy, 2(4), 220–231.
26.
GillS.KaurP. (2015). Family involvement in business and financial performance: A panel data analysis. Vikalpa, 40(4), 395–420.
27.
GiovanniniR. (2010). Corporate governance, family ownership and performance. Journal of Management & Governance, 14(2), 145–166.
28.
Gomez-MejiaL. R.Nunez-NickelM.GutierrezI. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44(1), 81–95.
29.
JensenM. C.MecklingW. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
30.
JiangY.PengM. W. (2011). Are family ownership and control in large firms good, bad, or irrelevant?. Asia Pacific Journal of Management, 28(1), 15-39.
31.
KowalewskiO.TalaveraO.StetsyukI. (2010). Influence of family involvement in management and ownership on firm performance: Evidence from Poland. Family Business Review, 23(1), 45–59.
32.
Porta R.LaLopez-de-SilanesF.ShleiferA. (1999). Corporate ownership around the world. The journal of finance, 54 (2), 471–517.
33.
LeeJ. (2006). Family firm performance: Further evidence. Family Business Review, 19(2), 103–114.
34.
MauryB. (2006). Family ownership and firm performance: Empirical evidence from Western European corporations. Journal of Corporate Finance, 12(2), 321–341.
35.
McConaughyD. L.PhillipsG. M. (1999). Founders versus descendants: the profitability, efficiency, growth characteristics and financing in large, public, founding-family-controlled firms. Family Business Review, 12(2), 123–131.
36.
McConaughyD. L.WalkerM. C.HendersonJr G.V.MishraC. S. (1998). Founding family controlled firms: Efficiency and value. Review of Financial Economics, 7(1), 1–19.
37.
MillerD.Le Breton-MillerI. (2006). Family governance and firm performance: Agency, stewardship, and capabilities. Family Business Review, 19(1), 73–87.
38.
MillerD.Le Breton-MillerI.LesterR. H.CannellaJr A.A. (2007). Are family firms really superior performers? Journal of Corporate Finance, 13(5), 829–858.
39.
MillsteinI. M.KatshS. M. (2003). The limits of corporate power: Existing constraints on the exercise of corporate discretion. Washington, DC: Beard Books.
40.
MorckR.ShleiferA.VishnyR. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.
41.
MorckR.WolfenzonD.YeungB. (2005). Corporate governance, economic entrenchment, and growth. Journal of Economic Literature, 43(3), 655–720.
42.
PindadoJ.RequejoI.de la TorreC. (2008). Does family ownership impact positively on firm value? Empirical evidence from Western Europe. Documento de Trabajo, 2, 08.
43.
PindadoJ.RequejoI.de la TorreC. (2011). Family control and investment–cash flow sensitivity: Empirical evidence from the Euro zone. Journal of Corporate Finance, 17(5), 1389–1409.
44.
PoutziourisP.SavvaC. S.HadjieliasE. (2015). Family involvement and firm performance: Evidence from UK listed firms. Journal of Family Business Strategy, 6(1), 14–32.
45.
Martin-ReynaSan J. M.Duran-EncaladaJ.A. (2012). The relationship among family business, corporate governance and firm performance: Evidence from the Mexican stock exchange. Journal of Family Business Strategy, 3(2), 106–117.
46.
SchulzeW. S.LubatkinM. H.DinoR. N. (2003). Exploring the agency consequences of ownership dispersion among the directors of private family firms. Academy of Management Journal, 46(2), 179–194.
47.
SilvaF.MajlufN. (2008). Does family ownership shape performance outcomes? Journal of Business Research, 61(6), 609–614.
48.
VillalongaB.AmitR. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80(2), 385–417.
