Family ownership and firm performance: evidence from Taiwanese firms

Purpose – Using the panel data of 465 Taiwanese listed companies and taking into consideration endogeneity issues this paper aims to examine the influence of family ownership on firm performances. Design/methodology/approach – The use of a panel data set encompassing a five-year period enables one to examine both cross-sectional and within-firm variations in the relationships between family ownership and firm performances. The paper also uses a simultaneous equation system to account for the endogeneity between family ownership and firm performances, and apply the quadratic equations to identify the percentage of family ownership that maximizes firm performance. Findings – When either a profitability indicator (ROA) or a valuation indicator (Tobin's Q) is applied, the empirical results show that family ownership positively affects firm performance. The results also show that the profitability of a firm (ROA) first increases and then decreases with family ownership. In other words, when families have more than 30 per cent control of the firm, the potential for entrenchment and poor performance becomes greater. Originality/value – This paper is the first to examine the relationships between family ownership and firm performances, while simultaneously addressing the issue of endogeneity and identifying the optimal level of family ownership in Taiwanese firms. The finding that family ownership positively affects firm performance elucidates why a family firm is one of the most important business development models in Taiwan. Meanwhile, the finding that the percentage of family ownership should not exceed 30 per cent to avoid the occurrence of poor performance also suggests that excessive family shareholdings may not be necessarily healthy for a family firm in Taiwan.Companies, Endogeneity, Family ownership, Panel data, Performance management, Taiwan

How Does Family Management Affect Firm Performance : Evidence from Taiwanese Firms

This study used the panel data of 465 Taiwanese listed companies by applying both accounting and market-value indicators to an examination of family management’s influence on firm performances. The empirical results show that family firms in Tai-wan have performed better than non-family firms. The combination of equity owner-ship and management right has helped family firms reduce agency cost and enhance firm value in the long run. As for family management, the empirical results suggest that if the founder serves as the chairman and CEO at the same time, it is most benefi-cial to the firm’s performance. When the position of CEO is passed to a hired manag-er, it may enhance firm performance in the short-run. On the other hand, when the po-sition is passed down to a descendant, it may be conducive to firm value in the long-run.peerReviewe

Do institutional investor and group, firm and time effects matter in enterprise performance in the corporate life cycle?

Corporations undergo growth, maturity and decline, stages which form the corporate life cycle. This study discusses the influence of group, firm and time effects on enterprise performance variation at the different life cycle stages of Taiwan’s electrical and machinery industry. Results indicate that firm effect has a stronger influence than group effect, and group effect has the strongest influence at the mature stage. Thus, group effect is greatly reduced, whereas firm effect should be reduced but increased at the decline stage, a finding that is different from general perceptions. Institutional investors are important for corporations, and the response strategies of firms for institutional investors vary at different stages of the corporate life cycle. Therefore, this study also discusses the influences of institutional investors on enterprise performance variation at the firm level. Results suggest that firms implement suitable response strategies for institutional investors. Moreover, domestic general enterprise investors have positive and large impacts on enterprise performance, whereas financial institutional investors have a negative impact during the decline stage