Family Firms

Family Firms

Family Firms

The topic of family firms focuses on a widely popular ownership form of public and private companies around the world (La Porta, Lopez-de-Silanes, and Shleifer, 1999; Faccio and Lang, 2002). Family firms are typically defined as companies in which the founder or a member of his/her family is a blockholder, officer, or director, either individually or as a group (Anderson and Reeb, 2003; Villalonga and Amit, 2006).

There are two competing effects of family ownership and control on firm value. Investors often assign a premium to family firms, especially when founders serve as CEOs, due to expectations that families can reduce owner-manager agency costs via monitoring of the firm’s management, as well as mitigate the short-termism problem. Families may also have strong incentives to preserve their socio-emotional wealth invested in the firm, such as family name and reputation, as well as family networks in business and politics. On the contrary, according to the entrenchment effect, families may extract private benefits of control from their firm, especially when family control goes beyond ownership with the help of control enhancing mechanisms, such as dual class shares or pyramids, and when the control is retained by the founder’s heirs for many generations.

In recent years, one of the main challenges for family firms is succession that is becoming more complex due to changes in family, management and governance systems. Evaluating different governance models, planning succession and creating long-term value for family firms are never ending challenges with academic, business and policy relevance. With the ageing of the population of entrepreneurs, business transfers due to family firm succession constitute a large part of transactions volume, and hence easing business transfers is mentioned, for example, as one of the priorities in the Entrepreneurship 2020 Action Plan of the European Commission. (See the ECGI conference “SMEs, Families and Capital Markets”, in June 2020.)

For related content, see also the topic page on Dual Class Firms.

ECGI will continue to track the debate and make new contributions and resources available through these pages. Queries, suggested inclusions, and project funding proposals should be directed to Elaine McPartlan at




Anderson, R.C., & Reeb, D.M., 2003, Founding family ownership and firm performance: Evidence from the S&P 500, Journal of Finance, 58(3), 1301-1328.

Andres, C. 2008. Large shareholders and firm performance - An empirical examination of founding-family ownership. Journal of Corporate Finance 14: 431-445.

Ansari, I.F., M. Goergen, and S. Mira. 2014. The determinants of the CEO successor choice in family firms. Journal of Corporate Finance 28: 6-25.

Bajo, Emanuele and Barbi, Massimiliano and Bigelli, Marco and Croci, Ettore (2019). Bolstering Family Control: Evidence from Loyalty Shares (July 1, 2019). European Corporate Governance Institute - Finance Working Paper No. 619/2019.

Bennedsen, Morten, Kasper Meisner Nielsen, Francisco Pérez-González and Daniel Wolfenzon, 2007, Inside the Family Firm: The Role of Families in Succession Decisions and Performance, Quarterly Journal of Economics 122(2), 647-691.

Bertrand, Marianne and Antoinette Schoar, 2006, The Role of Family in Family Firms, Journal of Economic Perspectives 20 (2), 73-96.

Bohren, Ø., Stacescu, B., Almli, L. F., & Søndergaard, K. L. (2019). When Does the Family Govern the Family Firm? Journal of Financial & Quantitative Analysis, 54(5), 2085–2117.

Bunkanwanicha, Pramuan and Gupta, Jyoti and Wiwattanakantang, Yupana (2014). Family Business Groups and Organizational Structure: A Study of Bank Pyramidal Ownership in Thailand (July 11, 2014). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 434/2014.

Burkart, Mike, Fausto Panunzi, and Andrei Shleifer, 2003, Family firms, Journal of Finance, 58(5), 2167-2201.

Caprio L, Croci E, Del Giudice A. 2011. Ownership structure, family control, and acquisition decisions. Journal of Corporate Finance 17(5): 1636–1657."

Chen, T.-Y., Dasgupta, S., & Yu, Y. (2014). Transparency and Financing Choices of Family Firms. Journal of Financial & Quantitative Analysis, 49(2), 381–408.

Chen, X., Q. Cheng, and Z. Dai. 2013. Family ownership and CEO turnover. Contemporary Accounting Research 30: 1166-1190.

Claessens S, Djankov S, Lang LHP. 2000. The separation of ownership and control in East Asian corporations. Journal of Financial Economics 58(1–2): 81–112.

David Sraer, David Thesmar (2007). Performance and Behavior of Family Firms: Evidence from the French Stock Market, Journal of the European Economic Association, Volume 5, Issue 4, 1 June 2007, Pages 709–751.

Ellul, A., Pagano, M., & Panunzi, F. (2010). Inheritance Law and Investment in Family Firms. The American Economic Review, 100(5), 2414-2450.

Faccio M, Lang LHP. 2002. The ultimate ownership of Western European corporations. Journal of Financial Economics 65(3): 365–395.

Feldman ER, Amit R, Villalonga B. 2016. Corporate divestitures and family control. Strategic Management Journal 37(3): 429–446.

Feldman, E. R., Amit, R., & Villalonga, B. (2019). Family firms and the stock market performance of acquisitions and divestitures. Strategic Management Journal (John Wiley & Sons, Inc. ), 40(5), 757–780.

Franks, Julian, Colin Mayer, Paolo Volpin and Hannes F. Wagner, 2011. The Life Cycle of Family Ownership: International Evidence, Review of Financial Studies 25 (6), 1675- 1712.

Goergen, Marc and Mira, Svetlana and Ansari, Iram Fatima (2019). Earnings Management around Founder CEO Re-appointments and Successions in Family Firms (August 1, 2019). European Corporate Governance Institute - Finance Working Paper No. 620/2019.

Gómez-Mejía LR, Haynes KT, Núñez-Nickel M, Jacobson KJ, Moyano-Fuentes J. 2007. Socioemotional wealth and business risks in family-controlled firms: evidence from Spanish olive oil mills. Administrative Science Quarterly 52(1): 106–137.

Gómez-Mejía LR, Makri M, Kintana ML. 2010. Diversification decisions in family‐controlled firms. Journal of Management Studies 47(2): 223–252.

Gómez-Mejía, L.R., C. Cruz, P. Berrone, and J. De Castro. 2011. The bind that ties: Socioemotional wealth preservation in family firms. Academy of Management Annals 5: 653- 707.

Hwang, Sunwoo and Kim, Woochan (2014). When Heirs Become Major Shareholders: Evidence on Tunneling and Succession Through Related-Party Transactions (March 19, 2014). ECGI - Finance Working Paper No. 413/2014.

La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer, 1999, Corporate Ownership Around the World, Journal of Finance 54, 471-517.

Masulis, Ronald W. and Pham, Peter Kien and Zein, Jason (2019). Family Business Group Expansion Through IPOs: The Role of Internal Capital Markets in Financing Growth While Preserving Control (June 3, 2019). Management Science, Forthcoming.

Masulis, Ronald W., Peter Kien Pham, and Jason Zein, 2011, Family Business Groups around the World: Financing Advantages, Control Motivations, and Organizational Choices, Review of Financial Studies 24 (1), 3556-3600.

Maury, B. (2006). Family ownership and firm performance: Empirical evidence from Western European corporations. Journal of Corporate Finance. Volume 12, Issue 2, January 2006, Pages 321-341.

Morck Randall, David Stangeland, and Bernard Yeung, 2005, Corporate Governance, Economic Entrenchment, and Growth. Journal of Economic Literature 43 (3), 655- 720.

Neckebrouck, J., Schulze, W., & Zellweger, T. (2018). Are Family Firms Good Employers? Academy of Management Journal, 61(2), 553–585.

Patel, P. C., & Cooper, D. (2014). Structural Power Equality between Family and Non-Family Tmt Members and the Performance of Family Firms. Academy of Management Journal, 57(6), 1624–1649.

Perez-Gonzales, Francisco, 2006, Inherited Control and Firm Performance, American Economic Review 96(5), 1559-1588.

Sharma P, Manikutty S. 2005. Strategic divestments in family firms: role of family structure and community culture. Entrepreneurship Theory and Practice 29(3): 293–311.

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Smith, Brian F. and Ben Amoako-Adu, 2005, Management Succession and Financial Performance of Family Controlled Firms, in Robert Watson (ed.), Governance and Ownership, (Elgar: Cheltenhamfort), 314-341.

Villalonga B, Amit R. 2006. How do family ownership, control and management affect firm value? Journal of Financial Economics 80(2): 385–417.

Villalonga B, Amit R. 2009. How are US family firms controlled? Review of Financial Studies 22(8): 3047–3091.

Villalonga B, Amit R. 2010. Family control of firms and industries. Financial Management 39(3): 863–904.

Wang, D. 2006. Founding family ownership and earnings quality. Journal of Accounting Research 44: 619-656.

Zellweger TM, Kellermanns FW, Chrisman JJ, Chua JH. 2012. Family control and family firm valuation by family CEOs: the importance of intentions for transgenerational control. Organization Science 23(3): 851–868.



Why Do Family Business Groups Expand by Creating New Public Firms? The Role of Internal Capital Markets

We document a new channel through which a family business group's internal capital market supports its members. Using data from 44 countries, we provide evidence that groups use internal capital to incubate difficult-to-finance investment...Read more

Ronald Masulis
16 August 2017

Family Business Groups and Organizational Structure: A Study of Bank Pyramidal Ownership in Thailand

This paper investigates how banks and finance companies operate in a family business
group. Using uniquely detailed ownership data from Thailand, we find that the controlling
families extensively use pyramids to control banks and...Read more

Yupana Wiwattanakantang
01 July 2014

Inside the Family Firm: The Role of Families in Succession Decisions and Performance

This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or...Read more

Morten Bennedsen
Francisco Perez-Gonzalez
01 June 2006

Revisiting Executive Pay in Family-Controlled Firms: Family Premium in Large Business Groups

According to the prior literature, family executives of family-controlled firms receive lower compensation than non-family executives. One of the key driving forces behind this is the existence of family members who are not involved in management...Read more

Woochan Kim
01 September 2014

[Riga] One of the priorities mentioned in the Entrepreneurship 2020 Action Plan of the European Commission is “easing business transfers”, for example, through reducing cross-border inheritance tax obstacles, improving information and advice services, and other initiatives. Likewise, stock exchanges are attempting to ease obstacles for SMEs, that are predominantly family-owned, to raise capital through public markets. The conference examined these tendencies. 

January 21 2020