Family involvement in Italian listed companies: the relationship between performance, default risk and acquisition strategies

Abstract

Purpose of the paper : to assess the impact of family involvement on performance, failure probability and acquisitions. Methodology : empirical analysis on a sample of 141 companies listed on the Milan Stock Exchange (2005-2011). To identify family firms, we defined some criteria that consider family presence both in ownership and in management. We also defined a synthetic measure of family involvement for family firms. In order to test our hypothesis we ran correlation tests, tests for proportion and we estimated linear regression models. Findings : family control in ownership is not statistically related to performance, risk and acquisitions. On the other hand, the presence of family controlled management influences some performance indicators and acquisition value but not the company’s risk of failure. Limitations : we did not assess the role of family succession. Also, we evaluated the degree of familiness only at the beginning (2006) and the end (2011) of the period of analysis. Originality of the paper : we investigated how family ownership and management affected the measurement of the family involvement indicator during the observed period. Our study also helps investigate the relationships between familiness key variables (ownership and management) and performance, propensity for acquisitions and probability of failure. Practical implications : family firms with a lower level of family involvement in the management dimension are characterized by a greater acquisition propensity. This may be a consequence of the fact that family managers manifest a higher risk aversion, preferring to ensure the company’s survival rather than implement external growth strategies.