Abstract

Research on the profitability of family firms is growing, but results are mixed, especially for small unlisted companies. We argue this is due to the co-presence of benefits and disadvantages of both family ownership (FO) and family involvement (FI). Thus, we build upon two complementary theoretical perspectives - the stewardship and the stagnation perspectives – to explore the presence of non-linear effects of these two variables on profitability. We run regression analyses on longitudinal data drawn from 294 small privately-held family firms in Italy. We measure FI by the involvement of the family in management, the involvement of the family in the board of directors and the number of generations involved. Our results grasp the complexity of the effects of FO and FI in small unquoted companies: we find an inverted U-shaped relationship between FO and ROA, a positive relationship between family involvement in management and ROE, and a negative relationship between the number of generations involved and ROE.

Share

COinS