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Family Firms and Financial Performance: The Cost of Growing

Author

Listed:
  • González, Maximiliano

    (School of Management, Universidad de Los Andes)

  • Guzmán, Alexander

    (CESA)

  • Pombo, Carlos

    (School of Management, Universidad de Los Andes)

  • Trujillo, María Andréa

    (CESA)

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 ownership (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.

Suggested Citation

  • González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2011. "Family Firms and Financial Performance: The Cost of Growing," Galeras. Working Papers Series 032, Universidad de Los Andes. Facultad de Administración. School of Management.
    • Handle: RePEc:uac:somwps:032
    as

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    More about this item

    Keywords

    Family businesses; family control; capital structure; Colombia;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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