Performance vs. Family Ownership and Management: The Case of Portuguese Wine Firms
Objective: The objective of this article is to empirically examine the relationship between firms’ ownership and control structure and their financial performance. The literature about performance determinants is abundant, however, the relation between performance and ownership and control structure in the context of family firms (FF) is much less studied.
Research Design & Methods: The article is focused on Portuguese wine firms due to their increasing importance in the Portuguese economy. A Unbalanced panel data of 117 firms for the period from 2011 to 2016 were used and a random effects model was applied.
Findings: The degree of family involvement shows a U-shaped relationship with performance, meaning that those firms where the family does not hold the majority in the board should be open to receive external managers with greater knowledge and experience and increase their internal competencies in order to enhance performance. However, the same is not true when the family has already a majority position in the board.
Implications & Recommendations: Firms willing to attain better performance should have boards either primarily composed of external managers, potentially more independent or, preferably, mostly composed of family members, with their interests fully aligned. One implication for FF owners, when the family does not have the majority in the board, is the need to reduce family presence in it, opening the board to non-family members, albeit that decision could ultimately depend on the family members’ competencies.
Contribution & Value Added: In the light of the agency and stewardship theories, this article extends the literature providing an application to a less studied sector and country.
Ownership structure; Financial performance; Family firms; Agency theory; Stewardship theory; Wine industry
Aggarwal, R., & Samwick, A. (2003). Why do managers diversify their firms? Agency reconsidered. Journal of Finance, 58(1), 71-118.
Amihud, Y., & Kamin, J. (1979). Revenue vs. profit maximization: Differences in behavior by the type of control and by market power. Southern Economic Journal, 45(3), 838-846.
Amihud, Y., & Lev, B. (1981). Risk reduction as a managerial motive for conglomerate mergers. Bell Journal of Economics, 12(2), 605-617.
Anderson, R., Mansi, S., & Reeb, D. (2003). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68(2), 263-285.
Anderson, R., & Reeb, D. (2003). Founding-family ownership and firm performance: Evidence from the S&P500. Journal of Finance, 58(3), 1321-1328.
Anderson, R., & Reeb, D. (2004). Board composition: Balancing family influence in S&P 500 firms. Administrative Science Quarterly, 49(2), 209-237.
Astrachan J., Klein, S., & Smyrnios, K. (2002). The F-PEC scale of family influence: A proposal for solving the family business definition problem. Family Business Review, 15(1), 45-58.
Bennedsen, M., Nielsen, K. M., Pérez-González, F., & Wolfenzon, D. (2007). Inside the family firm: The role of families in succession decisions and performance. The Quarterly Journal of Economics, 122(2), 647-691.
Bertrand, M., & Schoar, A. (2006). The role of family in family firms. The Journal of Economic Perspectives, 20(2), 73-96.
Capasso, A., Gallucci, C., & Rossi, M. (2015). Standing the test of time: Does firm performance improve with age? An analysis of the wine industry. Business History, 57(7), 1037-1053.
Chen, H., Hsu, W., & Chang, C. (2014). Family ownership, institutional ownership, and internationalization of SMEs. Journal of Small Business Management, 52(4), 771-789.
Chrisman, J., Chua, J., & Litz, R. (2003). A unified systems perspective of family firm performance: An extension and integration. Journal of Business Venturing, 18(4), 467-472.
Chrisman, J., Chua, J., & Litz, R. (2004). Comparing the agency costs of family and non‐family firms: Conceptual issues and exploratory evidence. Entrepreneurship Theory and Practice, 28(4), 335-354.
Claessens, S., Djankov, S., Fan, J., & Lang, L. (2002). Disentangling the incentive and entrenchment effects of large shareholdings. Journal of Finance, 57(6), 2741-2771.
Claver, E., Rienda, L., & Quer, D. (2009). Family firms’ international commitment: The influence of family-related factors. Family Business Review, 22(2), 125-135.
Cronqvist, H., & Nilsson, M. (2003). Agency costs of controlling minority shareholders. Journal of Financial and Quantitative Analysis, 38(4), 695-719.
Davis, J., Schoorman, F., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20-47.
De Massis, A., Chua, J., & Chrisman, J. (2008). Factors preventing intra-family succession. Family Business Review, 21(2), 183–199.
De Massis, A., Kotlar, J., Campopiano, G., & Cassia, L. (2013). Dispersion of family ownership and the performance of small-to-medium size private family firms. Journal of Family Business Strategy, 4(3), 166-175.
De Massis, A., Kotlar, J., Campopiano, G., & Cassia, L. (2015). The impact of family involvement on SMEs’ performance: Theory and evidence. Journal of Small Business Management, 53(4), 924-948.
Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155-1177.
Dyer, W. (2006). Examining the “family effect” on firm performance. Family Business Review, 19(4), 253-273.
Ernst, J., Kraus, S., & Matser, I. (2012). The relation between performance and family involvement – an exploration into the non-linear effects during the life-stage of Dutch firms. International Journal of Entrepreneurship and Innovation Management, 15(3), 198-215.
European Commission (2009). Overview of family-business-relevant issues: research, networks, policy measures and existing studies, Directorate-general for Enterprise and Industry, Brussels.
Fama, E., & Jensen, M. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301-325.
Fernández, Z., & Nieto, M. (2005). Internationalization strategy of small and medium‐sized family businesses: Some influential factors. Family Business Review, 18(1), 77-89.
Fernández, Z., & Nieto, M. (2006). Impact of ownership on the international involvement of SMEs. Journal of International Business Studies, 37(3), 340-351.
Gama, A., & Rodrigues, C. (2013). The governance‐performance relations in publicly listed family controlled firms: An empirical analysis. Corporate Governance: The International Journal of Business in Society, 13(4), 439-456.
Gomez-Mejia, L., Nunez-Nickel, M., & Gutierrez, I. (2001). The role of family ties in agency contracts. Academy of Management Journal, 44(1), 81-95.
Habbershon, T., Williams, M., & MacMillan, I. (2003). A unified systems perspective of family firm performance. Journal of Business Venturing, 18(4), 451-465.
James, H. (1999). Owner as manager, extended horizons and the family firm. International Journal of the Economics of Business, 6(1), 41–55.
Jensen, M. (1986). Agency costs of free cash ﬂow, corporate ﬁnance and takeover. American Economic Review, 76, 323-329.
Jensen, M., & Meckling, W. (1976). Agency costs and the theory of the firm. Journal of Financial Economics, 3(4), 305-360.
King, M., & Santor, E. (2008). Family values: Ownership structure, performance and capital structure of Canadian firms. Journal of Banking and Finance, 32(11), 2423-2432.
Kontinen, T., & Ojala, A. (2010). The internationalization of family businesses: A review of extant research. Journal of Family Business Strategy, 1(2), 97-107.
Le Breton‐Miller, I., & Miller, D. (2009). Agency vs. stewardship in public family firms: A social embeddedness reconciliation. Entrepreneurship Theory and Practice, 33(6), 1169-1191.
Le Breton-Miller, I., Miller, D., & Lester, R. (2011). Stewardship or agency? A social embeddedness reconciliation of conduct and performance in public family businesses. Organization Science, 22(3), 704-721.
Majocchi, A., & Strange, R. (2012). International diversification: The impact of ownership structure, the market for corporate control and board independence. Management International Review, 52(6), 879-900.
Maury, B. (2006). Family ownership and firm performance: Empirical evidence from Western European corporations. Journal of Corporate Finance, 12(2), 321-341.
Miller, D., Le Breton-Miller, I., Lester, R., & Cannella, A. (2007). Are family firms really superior performers?. Journal of Corporate Finance, 13(5), 829-858.
Miller, D., Le Breton-Miller, I., & Lester, R. (2010). Family and lone founder ownership and strategic behaviour: Social context, identity, and institutional logics. Journal of Management Studies, 48(1), 1-25.
Minichilli, A., Corbetta, G., & MacMillan, I. (2010). Top management teams in family‐controlled companies: ‘Familiness’, ‘faultlines’, and their impact on financial performance. Journal of Management Studies, 47(2), 205-222.
Morck, R., Nakamura, M., & Shivdasani, A. (2000). Banks, ownership structure, and firm value in Japan. The Journal of Business, 73(4), 539-567.
Pukall, T., & Calabrò, A. (2014). The Internationalization of Family Firms: A critical review and integrative model. Family Business Review, 27(2), 103–125.
Schulze, W., Lubatkin, M., Dino, R., & Buchholtz, A. (2001). Agency relationships in family firms: Theory and evidence. Organization Science, 12(2), 99–116.
Schulze, W., Lubatkin, M. & Dino, R. (2003). Toward a theory of agency and altruism in family firms. Journal of Business Venturing, 18(4), 473-490.
Sciascia, S., & Mazzola, P. (2008). Family involvement in ownership and management: Exploring nonlinear effects on performance. Family Business Review, 21(4), 331-345.
Shleifer, A., & Vishny, R. (1986). Large shareholders and corporate control. The Journal of Political Economy, 94(3-1), 461-488.
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52, 737-783.
Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801-814.
Vieira, E. (2014). The effect on the performance of listed family and non-family and non-family firms. Managerial Finance, 40(3), 234-253.
Vieira, E. (2017). Debt policy and firm performance of family firms: The impact of economic adversity. International Journal of Managerial Finance, 13(3), 267-286.
Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value?. Journal of Financial Economics, 80(2), 385-417.
Wach, K. (2017). Exploring the role of ownership in international entrepreneurship: How does ownership affect internationalisation of Polish firms?. Entrepreneurial Business and Economics Review, 5(4), 205-224.
Zahra, S. (2003). International expansion of US manufacturing family businesses: The effect of ownership and involvement. Journal of Business Venturing, 18(4), 495-512.
Zahra, S. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18(1), 23-40.
Zellweger, T., Eddleston, K., & Kellermanns, F. (2010). Exploring the concept of familiness: Introducing family firm identity. Journal of Family Business Strategy, 1(1), 54-63.
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a CC BY-ND licence that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are asked to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) only the final version of the article, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access). We advise using any of the following research society portals: