The impact of family ownership, control and management on firm performance in times of an economic downturn. An empirical study from the German market

Jan-Sebastian Hovest-Engberding, 2010


In recent academic research, corporate governance was found to be a decisive factor in explaining firm performance (Villalonga & Amit, 2006; Shleifer & Vishny, 1997). Furthermore, corporate governance studies have been used as a basis for analyzing the particularities of family firms, which play a dominant role in most developed countries (Shleifer & Vishny, 1986; La Porta et al., 1999; Claessens et al., 2002; Faccio & Lang, 2002; Anderson & Reeb, 2003) and are often found to perform better than nonfamily firms (La Porta et al., 1999, Astrachan & Shanker, 2003). However, the results of performance studies are often contradictory (Holderness & Sheehan, 1988; Anderson & Reeb, 2003; Morck et al., 2000; Claessens et al., 2002; Cronqvist & Nilsson, 2003; Bertrand et al., 2004). Not all studies claim that family firms are better performers, and furthermore, empirical research does not consistently confirm the effect of single corporate governance factors on firm performance.

This study has three research objectives. First, the current study attempts to examine the role of corporate governance in firm performance. Second, the study seeks to understand how family control, ownership and management are related to corporate governance and how the resulting differences between family firms and nonfamily firms influence firm performance. Third, the study compares pre-crisis performance to performance during the crisis to examine how different corporate governance structures affect family firms compared with nonfamily firms. In summary, this study aims to determine if family firms, due to their particular governance structure, perform better in times of crisis and, if they do, what the most relevant characteristics of family firms are.


family business, firm performance, corporate governance, economic downturn