Governing family enterprises and implications for performance - a financial perspective

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Additional analysis of closely held firms with ownership information indicates that this is a reasonable approximation. Swedish translations of all included data sources can be found in Appendix A. Euroclear Sweden receives notifications of all purchases and sales of stocks in listed firms in Sweden under the Law of Accounting of Financial Instruments SFS The definition of sole proprietors as family firms is also used by the EC definition and an earlier report by Mandl There are no estimates of employment in firms owned by Swedes that have moved abroad, but there is a general understanding that this group probably accounts for a non-negligible share of Swedish employment.

There was an exodus of successful Swedish entrepreneurs during the s, s, and s because of a highly unfavorable tax system, which in many cases had confiscatory effects. To develop their firms and maintain ownership within the family, many entrepreneurs moved from Sweden to countries such as Belgium, the Netherlands, Switzerland, or the UK.

Tax reforms have significantly improved the conditions for entrepreneurs since the early s. For instance, capital income tax rates have been cut and wealth and inheritance taxes have been abolished. These policies have considerably reduced incentives for a firm to move outside Sweden to ease its tax burden Henrekson Additional analysis shows that nearly all family firms are controlled across 1 to 2 generations.

Corporate governance

This includes both domestic and foreign owners, who can be both physical and legal persons. However, we do not have any additional information on foreign owners apart from their names and shareholdings. Pyramidal ownership is therefore taken into account. In the case that a partnership is a subsidiary, it is classified according to the ownership of the parent company. The contributions to total employment and GDP are stable over the studied time period results not shown here.

For additional details on the method used to estimate family firm GDP, see our working paper version, Andersson et al. Therefore, we could not include this measure in our analysis. For brevity, industry indices are suppressed in Equation 1. Karlsson gratefully acknowledges financial support from the Swedish Agency for Economic and Regional Growth. Skip to main content Skip to sections. Advertisement Hide. Download PDF. The characteristics of family firms: exploiting information on ownership, kinship, and governance using total population data.

Open Access. First Online: 04 October We apply the EC definition, which states that a firm of any size should be classified as a family firm if it meets the following criteria: i. The majority of decision-making rights are indirect or direct. This means that all government-owned limited liability firms are attributed to central and local governments Source: registers presented in Section 3. Furthermore, we find that family firms contribute an equal share of Swedish GDP.

These numbers are particularly interesting considering that both businesses and wealth were highly taxed in Sweden during the s, s, and s, which resulted in a considerable number of family firms migrating, being sold, or perishing Henrekson and Johansson : Henrekson ; Henrekson and Johansson This means that all employment in government-owned limited liability firms is attributed to central and local governments Source: registers presented in Section 3.

Table 3 shows the distribution of family firms across industries, which are presented in accordance with the Statistical Classification of Economic Activities in the European Community NACE rev 1. Table 3 Employment in family firms across industries in Another aspect of the composition of family firms is their distribution by size, as presented in Table 4. Table 6 shows that the average and median values for family firms are significantly smaller than for private non-family firms in terms of employment, sales, and total assets.

The average and median age of family firms is also greater. Furthermore, we find that family firms are less likely to take part in enterprise groups and to employ skilled personnel. They employ less physical capital on average, although more on the median. In terms of performance, family firms have a higher average and median return on assets in terms of EBITDA but lower in terms of EBIT, although the differences in mean are not significant.

In addition, they have approximately the same solidity as non-family firms and lower labor productivity than the average and median private non-family firms. Finally, family firms are significantly less involved in multinational enterprises and exports than their private non-family counterparts. Table 6 Family and private non-family firm characteristics means and medians for limited liability firms in The above comparisons do not examine the characteristics of family firms while controlling for other factors such as industry and size. We use these measures to illustrate the general characteristics of family firms and non-family firms among limited liability firms.

We regress the 13 firm characteristics discussed above on a family firm dummy and three firm-level features: firm size, industry, and year. This yields a descriptive characterization of the population of family firms while controlling for rudimentary confounding factors.

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Firm characteristics may differ across firm size; therefore, we control for the number of employees per firm Firm size. Due to collinearity, this variable is excluded when we analyze size-related characteristics Employment, Sales, and Total assets. The characteristics of firms are also likely to differ across industries. Therefore, we also control for the industry to which each firm belongs Industry. Industry is controlled for at the two- and three-digit levels according to the NACE rev 1. Finally, we control for the year in which each firm was observed Year.

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Commission recommendation of 7 December on the transfer of small and medium-sized enterprises. Downloaded by [ Commission communication from 14 March Transfer of businesses—continuity through a new beginning.


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Xi, J. Mapping the field of family business research: past trends and future directions. International Entrepreneurship and Management Journal, 11 , — Yu, A. Read the full text. Tools Request permission Export citation Add to favorites Track citation. Share Give access Share full text access. Share full text access. Please review our Terms and Conditions of Use and check box below to share full-text version of article. Citing Literature. Volume 41 , Issue 5 July Pages Related Information. Close Figure Viewer. Browse All Figures Return to Figure. Previous Figure Next Figure. Email or Customer ID.

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