Family firms performance and financial crisis

A large part of the conceptual literature seems to confirm a better performance of family firms in terms of financial, trade and economic performance. Indeed, specific characteristics related to family firms may generate competitive advantage in comparison with other kind of companies. These theoretical developments are validated empirically. Indeed, family ownership, family control, involvement of family members across generations and other control mechanisms enhancing performance have been analysed without concluding in a strong consensus. Besides, the financial turmoil that happened in 2008 had and still has a huge impact on the economic fabric all around the world. Analysing the performance of family firms in such a context therefore seems particularly interesting since few researches have been carried out in the field during economic or financial downturns. The purpose of this paper is thus to shed new lights on the performance of large family firms during the crisis by drawing up a comparison with non-family firms evolving in the same context. This analysis will show that family firms develop idiosyncrasies that make them more resilient than non-family firms.

 In order to assess the influence of family ownership on performance during the crisis, paired sample t-test are used on several financial indicators on a covering period of 6 years (2005-2010). This methodology has been chosen since it reduces biases due to demographic variable such as size and/or sector. Indeed, each family firm is compared with its non-family peer which presents similar size or sector affiliation so that the effect of family ownership on performance is isolated.

 The results obtained on a sample of 216 Belgian firms (108 family and non-family pairs) cannot allow us to conclude that large family firms under- or outperform their non-family peers although an insignificant outperformance of family firms is stated. However, our results suggest that family firms have strong indicators of resilience which occur when a firm shows absorption, renewal and learning capacities, and corroborate several researches lead in the field. Firstly, absorption capacity implies that the firms can count on immediate or potential resources. In this regard, our results indicate that family firms present significant higher level of self-funding. Consequently they seem to accumulate more resources than their peers, indicating that they are more able to absorb a shock such as the financial downturn. Secondly, renewal capacity supposes that innovativeness makes the firm more able to cope with the changes induced by a crisis. Our results show that family firms present higher investment rates during the crisis period, implying that family firms are more proactive regarding their innovation process during this period. Moreover, similar results are observed in terms of cost containment that helps to generate growth and improve operating results. Nevertheless, due to the insignificance of our results, a better renewal capacity in family firms cannot be shown. Finally, none of our indicators can suggest that the learning process is better implemented in family than in non-family firms even if family firms are expected to show higher level of cohesion.