Family Ownership and Firm Performance: Romania Versus Germany

Abstract

A consistent body of research is dedicated to the relationship between the ownership structure of a firm and its financial performance. Despite that, the hitherto researches fail to reach a consensus regarding this issue since both negative and positive relationships have been found out. This paper examines the impact of ownership’s type (more precise the impact of the family ownership) on the firm’s financial performance. The analysis includes a comparison between family and non-family firm performance using a sample of 1,161 Romanian companies and 1,342 German companies for a time frame that range between 2008 to 2015. Based on different types of static panel data regressions: Pooled Ordinary Least Squares (OLS), Fixed Effects (FE), Random Effects (RE) and a corrective model (PCSE), the main findings show very different results for the two considered countries. Financial performance, expressed as return on assets (ROA) and return on equity (ROE) seems to be insensitive to family ownership in Romanian companies and statistically positively correlated with it for German ones. A potential explanation for these outputs consists in the different development circumstances in the two countries in the period that forego the Second War. At the same time, other variables considered do not show significant differences in outcome between the two countries: size, age, capital intensity and leverage negatively influence the financial performance of companies.