Evidence on Family Firm Performance and Relevance of Context in an Emerging Economy

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 this paper studies the impact of family ownership, control and management on firm performance through the lens of external and internal context. It thus advances the debate that has so far been skewed towards studies from the developed markets, larger firms and micro analysis. 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 also find that the impact of family does not weaken over time and that family management results in poorer performance. We, therefore, conclude that family ownership, control and managementm per se are a significant impediment to firm performance in emerging markets contexts like India.