Using Artificial Intelligence to Measure the Family Control of Companies

Many studies have focused on family firms. Yet, grasping the nature of these organizations remains challenging because firms’ familiness can take many forms, which are hard to trace with traditional data. We use AI to unravel the complex and intangible influence of families on firms in large datasets. Whereas it classifies family firms often consistently with equity criteria, AI is able to gauge families’ legacy and values. As a result, using AI allows to detect more family firms in countries where families have a strong influence on firms even without large equity stakes. Importantly, AI distinguishes between family and lone-founder firms, and it assigns higher scores to firms that are eponymous, heir-led, and with multiple family directors. Finally, classifying family firms by using AI provides financially-relevant information to investors.