Do Family-Owned Firms Perform Better than Non-Family-Owned Firms?

Abstract

This thesis examines the performance of family-owned and non-family-owned firms in Norway from 2000-2015. The performance differences are compared using return on assets (ROA) as the indicator of firm performance. The thesis also takes a closer look at performance in family and non-family firms within five different industries: Retail, shipping, architecture, financial services and IT. The research is mainly based on OLS panel regression, where the analysis is divided into four models. To verify the data robustness of the results from the main specification, two additional robustness checks using the generalized method of moments (GMM) and panel OLS controlling for industry specific effects are performed. On average, family-owned companies tend to perform better than non-familyowned companies. From the four regression models representing the main specification, the results show that family ownership does not affect firm performance for the population as a whole. The robustness check incorporating GMM also confirms this. The results suggest that the family-owned companies tend to perform better because they have smaller boards and a higher degree of inside power, rather than the family ownership itself. Unlike previous research, this thesis also looks at differences within industries. The results presented find that family ownership has a positive, significant effect on firm performance within the architectural industry. For companies within shipping, this relationship is the opposite, and family ownership is shown to have a significant, adverse effect on firm performance. This contradicts what we found when analysing the population as a whole. Indeed, our results indicate that the effect of family ownership on firm performance relies on the industry which the firm is located within. The results presented also suggests that the reason for these results may be due to different industries being exposed inversely to agency conflicts. Compared to previous studies done on family firms in Norway, this thesis neither rejects nor confirms previous research and is best seen as complementary.