Married to the Firm? Family Ownership, Performance, and Financing in Private Firms

Abstract

We show that family ownership is associated with more stable and liquid, but slower growing, young …rms. Using a large sample of private …rms across Europe, we …nd that family-owned …rms have higher pro…t margins, returns on assets, and survival rates compared to non-family-owned …rms. However, family-owned …rms also hold greater reserves of cash, rely less on external debt, and invest and grow more slowly. These di¤erences between family-owned and non-family-owned …rms are largest early in the …rm life cycle and when a married couple holds a majority of the …rm’s equity. Family ties, particularly marital ties, between owners facilitate conservation of cash and lower operating costs, which increases …rm survival but which also dampens investment and growth. Our results indicate that families choose to start and manage very di¤erent types of …rms relative to unrelated founders. Keywords: Family ownership, private …rms, performance, …nancial constraints, growth JEL Classi…cation: G32, G18, O16

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Cite this paper

@inproceedings{Belenzony2012MarriedTT, title={Married to the Firm? Family Ownership, Performance, and Financing in Private Firms}, author={Sharon Belenzony and Rebecca Zarutskiez and David A. Sraer and Margarita Tsoutsoura and Bel{\'e}n Villalonga and John Van Reenen}, year={2012} }