How Family Ownership Impacts Firm Performance- A Study of Listed Firms in India

Working Papers
Bang, Nupur Pavan.,Vishwanathan, Anierudh., Ramachandran, Kavil. "How Family Ownership Impacts Firm Performance- A Study of Listed Firms in India ", Hyderabad, Telangana, India
Ownership of firms and their impact on firm performance has been a topic of interest for long. Concentrated ownership of a firm in the hands of a family presents unique opportunities and challenges that may have an impact on the performance of the firm. Multiple studies have arrived at differing conclusions with regards to performance of family firms. Using a unique proprietary database of scientifically classified listed family and non-family firms covering 4,186 firms in India from 1990 to 2016, this paper studies the impact of family ownership on firm performance, thus advancing the debate that has so far been skewed towards studies from the developed markets and larger firms. Our treatment of family ownership takes into account ownership concentration in the hands of the family, the management control with the family and ownership continuity within the family. We have subjected the data to many sub-sample and post hoc analyses with several robustness checks to ensure that our findings and conclusions are reliable and valid. Using accounting and market measures of firm performance, we conduct a time-series cross-sectional comparison of family and non-family firms. Our analyses consistently reveal that family firms performed poorly in comparison to non-family firms in India. We observe that family ownership in general has made negative contributions to firm performance. We, therefore, conclude that family ownership and control per se are a significant impediment to firm performance for the listed firms in India. To the best of our knowledge, this is the first large sample study to examine the relationship between family holdings and performance of firms listed in major stock exchanges of India.