The growth and performance of family businesses during the global financial crisis: The role of the generation in control

By Rubén Arrondo-García, Carlos Fernández‐Méndez, Susana Menéndez-Requejo. 2016

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This article analyses whether the Global Financial Crisis (GFC) has differentially affected the growth, risk taking and performance of family businesses depending on the generation in control. Adopting a socioemotional wealth approach, we expect that stronger emotional attachment to the firm in first-generation family businesses leads these businesses to commit more resources and take greater risks than multi-generational family businesses during crisis periods. Nevertheless, their special interest in non-financial goals leads us to predict that first-generation family businesses will perform worse during crises. Evidence from a data sample of private, unlisted and large Spanish firms (6,315) throughout Spain’s particularly deep crisis over the 2006–2011 period shows that first-generation family firms grew more and increased their debt ratios significantly more than multi-generational family firms during the global financial crisis. However, based on return on equity, and consistent with our conjecture, first-generation family businesses performed worse than multi-generational family businesses during this period.

Subfields: Accounting, Management of Technology and Innovation, Organizational Behavior and Human Resource Management

View Paper: https://www.semanticscholar.org/paper/fb5f63407856b17452f88394799e2e4fc1b4b1f3